How did Sai Baba react to the people who had insulted and harassed him, and what was his general disposition towards the village?

Sai Baba's reaction was one of complete mercy. The source text from Chapter 0 explains that even though some villagers had harassed him and were very scared after realizing his power, they had no reason to fear. This was because Maharaj's motto was to do good even to those who had wronged him. He was not one to hold a grudge. In fact, he loved all people and cared for them like a father. He would even provide prior warnings if any calamity was about to befall the village, allowing those who listened to become fearless.