Translation:She would use magic in this case.
I'm not an english native speaker, but - without wantink to boast - I can say my English is quite good. However, I think that word order of yours really sounds wrong?? Or would it be used to stress that it's only in this special case?
As a native Midwesterner, my instinct would be to keep "would use" together. But splitting them in this way sounds fine to me, just a little clunky. (The clunkiness is illustrated by the commas MarkGrand subsequently suggested.) Without italics or spoken emphasis I also don't feel any special stress. I think it makes sense to accept it as an alternative, especially since some folks may try to play it safe by transcribing the German phrase relatively directly.
PS. You can edit your post if you want to fix a typo.
I am a native English speaker and "putting in this case" before "use magic" sounds just as natural as the translation that Duolingo uses. There is no reason for it be rejected.