Didn't like this episode for all the reasons given above (and I'm totally taken out of the suspense in any episode where they focus of the detective's marital problems and S&M relationship) but I'm still intrigued by the mystery and am hoping they will tie this up in a way that is consistent with the clues and not out of left field. I like elements of some of the theories you all have posted, though none of them work completely in my mind. I do think Munchausen and/or Munchausen by proxy has to be a factor, and I think the mother is the culprit because she had the most access to Phoebe in her early years (remember that she insisted to her husband that she had to have Phoebe in her bed or bedroom). Even after Phoebe was sharing a room with Cora, the mother still would mostly control Phoebe's access to food, drink, and medications. I don't see Cora being the culprit in making Phoebe sick because it wouldn't benefit her to make her sister sick--people who do this (most often mothers) typically do it for the positive attention and sympathy they get, especially from medical professionals, and Cora got only negative attention, punishment, and guilt. Another reason I suspect the mother is that when Ambrose visited the parents she was sick and appeared to have bruises or skin lesions on her arms; that would be consistent with one of the theories about the cause of MBP--that the person doing this to a child may have Munchausen herself. We don't know whether the mother did anything to herself before Phoebe was born, but once Phoebe and Cora were gone she could have started making herself sick to get the attention and sympathy she used to get from her daughter's sickness. I may be wrong about all of this, but it is a fascinating and disturbing topic--here is one discussion: https://kidshealth.org/en/parents/munchausen.html
The problem I have with Cora really being Phoebe is the physical reality that Phoebe seemed too weak to go anywhere on her own--it seemed like she could barely walk. Unless Cora somehow physically carried her to the bar, how did she get there? Even if JD was part of the sex ring (most likely as the one who seduced and drugged girls and took them to the club), why would he want to help Cora bring Phoebe there? I also don't see JD caring about "curing" Phoebe unless he really cared about Cora and thought it would release her from Phoebe's "vampire" control. Also, when Cora's husband confronted JD, JD said something like "Does she still say Daddy, Daddy, Daddy [when she is having sex]?" Cora may have had Daddy issues (including the possibility that he molested her), but Phoebe didn't seem to feel strongly about him one way or another.
One possibility that would sort of fit the "Cora really being Phoebe" theory is if Cora had a psychotic break (whether from drugs or seeing something traumatic, or just the extreme stress of her home life) and somehow "became" Phoebe psychologically--in that sense, letting Phoebe live through her. But even if this is the case, I still can't figure out how this all fits into the sex parties and possible human hunting.
Going back to the Munchausen theory, one possibility is that the mother accidentally killed Phoebe and forced Cora to help her bury her--that would certainly be a traumatic memory that Cora would bury. But given Phoebe's history of illnesses and interactions with medical professionals, I don't see how the mother would explain her disappearance. And this also wouldn't fit into the sex parties and possible human hunting. But there could be two separate stories and two separate traumatic memories.