I think Jin Ho-Kyung already knew Mudeoki is the real Bu-Yeon at the end of episode 16 because of the glowing wall / symbol behind Cho-Yeon and Mudeoki. Her smile instantly disappeared as she saw Cho-Yeon running toward her, yet the wall kept glowing because Mudeoki is standing next to it. This could be Bu-Yeon's way of telling Jin Ho-Kyung that she is here and the one in front of her is a fake. The camera work was interesting as well, it first zoomed in on Mudeoki covering her eyes in pain, then it zoomed in on the glowing wall, and finally, it zoomed back in on Mudeoki. Jin Ho-Kyung's expression at the end was not that of joy, but more like she was shocked at the revelation. (of course there's a chance that people on the forums are right and Jin Ho-Kyung is truly a 0-IQ character but yeah, I think she knows.)
Random Theory: Bringing Naksu back to life isn't possible at all because it was said that "the power of soul ejector…
Counterpoint: Jin Mu wanted Naksu dead and he has given up on her, that's why he gave the orders to Gil-Ju to immediately eliminate the soul-shifted Naksu. Obviously Gil-Ju doesn't want to do that so we can assume it was a direct order from Jin Mu. Jin Mu also thought Naksu is 100% dead ( in fact, if you rewatch episode 2, you would realize that the body-burning occurred immediately after they thought they killed Naksu. ) so he had no incentive to protect Naksu's body ( as he believed her to be dead ) and the only guy who could've had an incentive to protect her body is, well, Jin Mu. The only reason I can think of, in which Jin Mu would want to fake the body-burning is if he had something in store even if Naksu's soul is gone, such as someone else to soul-shift into said body. Naksu's body is quite strong so maybe he'll soul-shift someone else into Naksu's body to do his dirty work and that's when Mudeoki / Naksu realize that the body is intact and she can soul-shift back into her original body. Most likely the body is gone but Mudeoki uses the ice stone to help Naksu get her body back, but who knows.
This show honestly for me has the potential to be at least a 9.5/10 and I'm not kidding. It's been a long time since I was this hooked and thought, "we have something really special here, this is the good stuff." I don't understand how this is only 8.4/10 nor do I understand why this show is so criminally underwatched, but this is probably the best show of the season, hell, maybe of the year. Yeah I watched Again My Life, it's alright the ending's meh, Doctor Lawyer is just OK and I find myself getting bored (but now it's getting a little bit more exciting in ep 8), Why Her? is really really good and I'm digging the chemistry between Gong Chan and Oh Soo Jae, but none of the shows made me as impressed as Alchemy of Souls. Like I said, if they continue doing this well, it has the potential to enter top 10 on MDL quite easily, an absolutely incredible show so far and I look forward to the next 16 episodes.
Edit: Not joking, it might overthrow Mr. Queen in my top 10 list as the top 1-2, I didn't think that was possible but this show is crazy good.
I couldn't for the life of me figure out why people put Angel's Last Mission: Love on the list, KMS and SHS had genuinely incredible chemistry in the show and I personally really loved it, how is that show THAT high up on this list?
Edit: Not joking, it might overthrow Mr. Queen in my top 10 list as the top 1-2, I didn't think that was possible but this show is crazy good.