Shoving aside the bullshit rationalizations that the writers presented for Regina in order for her to look more sympathetic, let's just take a look at the facts:
Regina was a professionally unsuccessful woman with a broken relationship with her spouse, a drinking problem, a home in a dangerous neighborhood, and very little money to her name. When she found that her biological daughter Bay was being raised in a very rich family that were ostensibly meeting or exceeding Bay's every need, Regina had a choice:
Attempt to reclaim Bay as her own daughter, and attempt to raise Bay as best she can, given the problems listed in the above paragraph. Of course, Regina would need to give up Daphnie as well, and by then Regina had - to say the least - developed a strong emotional connection to Daphnie. OR
Intentionally continue with the Cuckoo plot: http://en.wikipedia.org/wiki/Cuckoo#Brood_parasitism
The incentives of this are self-evident: not only is Bay nearly destined for a life with much more likelihood of emotional stability, Bay will get the chance to go to the best schools and will never have to worry about being taken care of. Since Regina now knows about Bay - she can continue monitoring the situation, and if things start looking grim for Bay (i.e. bruises on her face and hands, crying all the time, etc.), Regina can always come to the rescue.
Well, she played the second card, without caring about the fact that she was actually doing what was worse for Daphnie and Daphnie's parents. Furthermore, she continued to try to keep Daphnie as reliant on her as she could. While I know this is an unfounded speculation - from a purely selfish perspective, her actions make perfect sense: another escape hatch in case Regina's problems got so bad that she might actually need to reveal the secret to Daphnie's biological parents in order to wheedle some money to bail her out.
Once Bay found out, Regina was able to ride good fortune to improve her own life as well, ingratiating herself to Daphnie's biological family while retaining a measure of their respect. Regina may have had emotional rationalizations for her actions, but her actions were purely selfish and evil almost beyond words.
I've met garbage like her before, though in not quite the same circumstances. I scorn the writers for being too afraid to tell the story in a more realistic manner.