I read somewhere that doing the granny rags stuff screws up the clean hands achievement especally the still.
No, it's not the still. There's an encounter with her much, much later, in Chapter 7, where even if you take her out non-lethally you lose out on Clean Hands. I don't feel like getting into the details, but it does make a sort of sense. However, it's very much a technicality kind of thing and quite annoying considering the game will let you get away with poisoning the still.