I too think Sarah knew about the pregnancy, there are hints of that throughout, and I'm in two minds about the baby's death. Part of me thinks that Sarah could not kill it because of her deep held beliefs and it is made clear that Plain people are peace loving, plus she had seen her own child die and lost her son for religious reasons too. So therefore she must have hidden the body...but then she'd have known it would be found and that Katie would get the blame! And would a loving mother do that to her child? Actually it begs a lot of questions doesn't it? If Sarah knew Katie was pregnant and knew she couldn't keep the baby why didn't she find some other way around the problem...like sneaking her off to an abortion clinic with her sister's help...against her beliefs, yes, but surely better than cold blooded killing? And she must also have known it was not Katie's beau's child because then she would have just confronted Katie and got her married..wouldn't she? So it actually shows Sarah up to be quite sly and devious, and maybe she was mentally ill due to her losses. And then again it did say she had no problem killing chickens..but Katie couldn't do it....
If she did kill the baby or conceal the body, she must have had some faith to think that Katie would not get sent to prison, therefore losing her too, so she can't have been thinking straight. I mean, why leave the baby where it could be found, wouldn't she go bury it somewhere?
Ho hum, that's really got me thinking now