Madame Merle is one of the most admired women in Europe. Everything she does is in perfect good taste. As Mrs. Touchett says, she hasn't a fault. But this means that Madame Merle has created a visible exterior to cover up her inner corruption. As the reader later learns. she has been an adulteress, but she covered her licentious behavior with such good taste that the world is unaware of it.
Madame Merle had very great ambitions as a younger person. She has constantly been frustrated in her desires and has consequently developed certain forms and ceremonies to compensate for her failure. She plays the piano flawlessly-, she is welcomed in most of the great houses of Europe; she is intelligent, witty, and charming-, she is never given to excesses, and she never makes a blunder. She understands human nature and knows how to accomplish anything.
Given her nature, it is only natural that Isabel, innocent as she is, should fall prey to Madame Merle's more polished and experienced ways. In other words, Isabel is not an easy victim; her conqueror or superior must be a superior person.
Madame Merle's great flaw is her ambition. When she sees Isabel achieve something that she would have liked to possess, her true nature is revealed. Thus, it is her ambition to have Pansy make a superb marriage that leads Madame Merle to perpetrate her treachery against Isabel. Since Madame Merle has failed so miserably in life, she desires that her daughter should make a brilliant match. Her strong ambitions and firm pursuit of her goal finally make her an odious person. She is so determined to succeed that she goes beyond her usual good taste and decorum. This allows Isabel to see her for what she is. But even in her failure, Madame Merle recognizes that she has been "vile" for no apparent gain. Furthermore, we recognize that finally even Madame Merle's own daughter does not like her and quite the contrary, the daughter does like Isabel, whom Madame Merle had so horribly betrayed.
In the final analysis, Madame Merle, like Gilbert Osmond, represents the European personality that sacrifices all that is human and natural and sincere for something that represents the perfect form and ceremony. The acquired taste and rule become more important than real human relationships.