Having Olivia back as the matriarch for the Barber/Winters clan would be such a great idea to make the family more prominent. What are we left with now? Nate (who's incredibly hot, but doesn't get a story), Devon, and Lily appearances. If Olivia was there as the mother-figure to all three it would really complete the family.
But she was faking being a bad person. She decided to let Victor think she was trash, in order to make Nikki look good, so that Victor and Nikki could be happy together. Katherine figured it out at the end of the episode. And in the episodes after that, it was revealed to Victor that his mother was putting on that act, to help him. He forgave everything, and his mom moved into the ranch until her death (she was already ill then, so she didn't live that much longer).
But yeah the actress playing his mom was pretty convincing!
Olivia is working for Doctors Without Borders. She sent her condolences when Neil died.
And yes it's criminal that the character of Olivia has been alive all these years but we never see her.