I thought I would see what I could find out about the Widow Lacey. We are she had two children, a boy 12, and a girl 6. The town of Au Sable is located in Iosco County, Michigan, so I started with the 1880 census. There is only one family with the name of Lacey in the index. Kate Lacey (listed as a widow) and her 8 year old son and six year old daughter. It sounds like a pretty good match.
We have Kate Lacey, 34 (born circa 1846); William Lacey, 8 (born circa 1872); and Lizzie, 6 (born circa 1874). The only thing is I cannot seem to locate any of the other individuals named in this story. I couldn't find Kate Lacey or her family in the 1900 census.
I did find this biographical sketch of Henry Russell and it does say he lived in Au Sable.
Using the information in the History of the Lake Huron Shore, I was able to find Henry Russell in 1880 census of Iosco County (indexed as Heney Russell) living in Oscoda.
The article in the Big Rapids Current mentions the Winchester Hotel. I found a photograph of the Winchester Hotel at SeekingMichigan.org.
I also found J. W. Widdifield in the History of the Lake Huron Shore. According to the biographical sketch, The Winchester Hotel was in Oscoda. Still couldn't find J. W. Widdifield, though. I wonder what happened to Kate and her children...