Spirit in plague embodying that lady (7)
I believe the answer is:
banshee
'spirit' is the definition.
(spirit in Irish mythology)
'plague embodying that lady' is the wordplay.
'plague' becomes 'bane' (I've seen this in another clue).
'embodying' is an insertion indicator (to embody can mean to contain or include).
'that lady' becomes 'she' ('she' refers to a woman).
'bane' enclosing 'she' is 'BANSHEE'.
'in' is the link.
(Other definitions for banshee that I've seen before include "Irish female spirit who warns of an impending death" , "Wailing female spirit" , "Wailing woman warning of a death" , "Wailing woman of Irish legend" , "'Wailing woman, warns of impending death (7)'" .)