In medieval times no one was safe from being accused a heretic or a witch by their enemy, people lived in fear of the inquisition.
*You heard that sound? It was me, doing the mother of all sighs*
1) Inquisition isn't a short for Catholic Church. It existed various inquisitorial tribunals, existing from XIII century up to...well technically it does exist on another name today.
Anyway, whatever medieval Inquisition (that was taking orders from church) and Spanish one (that was taking orders from royal administration) did had procedures.
Basically, accusing someone of heresy without proof, could lead to have the same condamnation that if you were yourself heretic.
Is it to say inquisitorial trials were clements? Hell, no. But they weren't much different to secular trials on the use of torture (non-systematical, by the way and seen suspiciously, officially at least, read
Ad extirpenda) and condamnation.
Actually, there is a consensus about how inquisitorial condamnations were more clement than secular (Admittedly, it wasn't too hard). Death condamnations (and we're talking of the ones actually executed, not the commutated) were in a range of 10% to 1%, both being extremes, the more average being something like 4 or 5%.
It's huge, and for a religion that gives on mercy and charity, isn't that much coherent. But nothing like an unstoppable death machine.
2) Belief in witches was actually condamned by church up to the XV, as (to resume it) "nobody can fly, and if you believe that, you must be under some demoniac influence". It was explained as that devil DID tempted witches by making them believing they had powers, which of course they hadn't. Some een said people believing being such were mentally ill.
The great witches trials and executions would happen after the XV, critically in an atmoshpere of religious confrontation between protestant and catholics (basically, more on the religious frontline, more executions. Spain did had the lowest execution rate of witches).
3) People didn't feared inquisition. They actually asked for more deaths, more harsh treatment. Witches trial were often matter of mob justice.
Remember that medieval and renaissance society (up to the XVII) is based on religion. It's the cement of the community, and when someones renounce it to another or shows different beliefs, it was interpretated as a threat to community itself.
It's maybe the more dramatic mistake you did : if people lived in fear of it, they could have pressured or at least revolted against it. But if something, they accompanied it when not blaming for being to pointillous (too much procedures and verification) and relativly clement (again, not along our standards or merciful ones)
Now targeted groups did feared it. They were usually minoritaries, rejected by the bulk of the people, for aforementioned reasons.
In post-medieval Spain, it was aggravated by the suspicion about conversos, judeos or moriscos and the resistance of these groups to assimilation (while many converted were the most virulent against their former social groups), but even in these conditions, it certainly didn't turned to 1984.