Note that this is NOT Ibaraki-Douji's Arm, this is the true form of Ibaraki Kasen once she fuses with her arm again (the manga gives her intro text that confirms her name is still Kasen).
Was she an oni before she got her arm back? Getting her arm back would have "healed" her, which was the drawback of the drink she was using to preserve her arm. If she was always an oni, why did she lose her horns when she lost her arm? Or were they somehow hidden? I still have questions about this whole thing.
She is an old friend of both Yuugi and Suika, so it's pretty likely she was an oni before losing her arm. Also Suika points out (perhaps erroneously, but who knows) that Kasen is merely pretending to be a hermit, which implies at some point in the past she might've been something else. About the horns, given that Suika doesn't point it out, it might be something the oni (or at least Kasen) could do. So Kasen's really just disguising herself.
Alternatively, she was a human but is still good friends with the oni (good enough to be granted a seat as the Four Deva). Lost her arm and then had to use the medicine box to heal herself, at some point consuming enough that she's turned into an oni herself. This one is a bit convoluted though, and I don't see ZUN writing something like this.