@theseniorsenor My guess is that the parameters changed for Penelope the NPC villain vs. Penelope the playable character. In the main story, since as you pointed out, Penelope exists to be antagonist to the heroine, the game auto keeps her around till she's filled that role. However, when the player is playing as her, then that's when she gets all the death flags which is why it's hard mode. Essentially the main game's route is predetermined for her while in this version involves player choice + risk.
Also remember the goal of this game mode requires her to win over one of the male leads before the main storyline timeline kicks in. If she fails to do so, she dies. Moreover, because she starts off with 0 or less likeability and her chances of dying increase greatly when it's a negative number, if she were to keep up a villain act she'd likely get killed long before she won any hearts. As she is the protagonist now, there is no need for her to play the villainess. Her goal is the same as any otome, to make the choices that gain her the most favor (it's just a lot harder and more dangerous in her case).