The previous answers were right...no demons in Indian mythology. But I know the story, too. It is not North American Indian at all, it comes from Central America or South America.
It is a story of a ghost woman, not a demon, who was a priestess once (in another story, she was a "watch woman"...I'm not quite sure what this suppose to mean, except maybe that she was possibly set to watch for enemy, all though that doesn't feels right, knowing the status of women in South America/Central America tribes).
Apparently, this woman seen an enemy approaching her village. Scared, she tried to warn her people, but was caught, raped and killed by the warriors of enemy tribe. Her screams were so loud, that some of the villagers heard and manage to flee before enemy came...some others didn't and were slaughtered.
The ghosts of the dead ones blamed the woman for not warning them as well, even though it wasn't her fault they didn't hear. Woman objected to gods, asking them to judge, but also, blaming them for not all of her people heard her screams.
Gods thought it over and then brought woman back in form of a spirit, giving her the eyes of jaguar, so she can see enemy even in dark. She is to watch over innocent people and to warn them when the enemy is coming. She is also to lead "just warriors" to their goal and keep their enemy asleep and unwarned, by seducing them (personally, I'm not sure about anything "just" here, but...).
I don't know the origin of the story, except it should belong somewhere America (South or Central). It always felt odd to me and seemed out-placed...there's a beautiful old book in my library, with incredible myths and stories inside, but it is really untidy made (in fashion that it doesn't tell where the story exactly is, just points the continents).
Anyway, this story reminds me a lot on the story you told, but could be a different one. Hope you find out the real source. To tell you the truth, woman being a demon and all, it actually sounds like a story with an African backgrounds, rather than anything Indian.