The characters of Storybrooke, except for Henry, Emma, Mr. Gold, Regina, and August, are pretty oblivious. I’m just surprised that Regina would even risk hinting at town “legends” for fear of putting ideas into people’s minds. She already suspected Mr. Gold of knowing, and he confirmed her hunch in episode 12.
There is a TV summary of OUAT which I think is quite revealing as to whether magic still exists in Storybrooke and whether Emma will soon start to believe in the possibility of its existence.
“…Of course Emma doesn’t believe a word, but when she brings Henry back to Storybrooke, she finds herself drawn to this unusual boy and his strange New England town. Concerned for Henry, she decides to stay for a while, but she soon suspects that Storybrooke is more than it seems. It’s a place where magic has been forgotten, but is still powerfully close… where fairytale characters are alive, even though they don’t remember who they once were. Emma will have to accept her destiny and fight for everything that once was.”
"That’s how you know you’ve really got a home. When you leave it, there’s this feeling that you can’t shake. You just miss it." Neal Cassidy