Castle Hill is a genuinely enormous piece of medieval engineering, one of the largest surviving Norman motte earthworks in England, raised within the ditches of a far older Iron Age enclosure that had already occupied the site for well over a thousand years before any Norman lord arrived to build a castle on top of it. That physical scale, a huge, deliberately unnatural mound dominating the town beneath it, has clearly done a great deal of work in generating the folklore attached to the hill, in the same way that any sufficiently large and strange earthwork tends to attract stories trying to explain why it is there and what it might still contain.
The most commonly repeated piece of modern folklore is a ritual rather than a haunting: walk around the mound seven times at the stroke of midnight, and the Devil himself will appear. This belongs to a widespread family of English folk rituals built around repetition and a significant number, most famously the various "walk around the church backwards" or "run around the building thirteen times" traditions found attached to churches and ancient monuments across the country, in which the physical act of circling a significant structure a set number of times at a liminal hour is treated as a kind of summoning spell in its own right, independent of any specific historical event tied to the location.
An older layer of local legend takes a different approach entirely, holding that a buried mansion lies concealed somewhere within the body of the mound itself, a piece of folklore that reads as a fairly direct, if fanciful, response to the genuine strangeness of a hill this size sitting in the middle of an otherwise ordinary market town, an attempt to explain the earthwork's bulk by imagining something grand and man-made hidden inside it rather than accepting it as simply an enormous quantity of deliberately piled earth. Neither story has any documented historical basis, and both are recorded here as living local tradition rather than events with any claimed date or witness.
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