Quote Originally Posted by Alex80 View Post
"Это была злая старуха"
Это is not a subject here, in fact.

Это can function either as a demonstrative pronoun or as a demonstrative particle in Russian. When used as a particle it is uninflected.

"Это была злая старуха"
Here "это" is a particle and it refers to the entire sentence, not to старуха.
It is grammatically similar to "Там была злая старуха", except that там is an adverb, not a particle.