There is always a lot to say about this topic which is why I love talking about it :)
I say let's try and find a middle ground. I also prefer the pretend magic if I'm honest, but if you add a hint of mystery to that, kind of like the "true" secrets of the craft known only by the ones initiated or taught. The secret is the source of the magic but it is just that, a secret. So nobody really knows if it is actually real, all they know is that it works, pretend or not. The mechanic I see behind this is the power of belief. By believing something works you're making it happen, much like a self fulfilling prophecy which fits perfectly into this kind of idea. Of course there will always be the unexplainable events and feats of magic which keep you wondering, always guessing, asking yourself if there really is such a thing as magic. 

I imagine a practitioner of magic would be viewed the same as a brewer of poisons. Witches and Sorcerers are able to brew potions, speak to birds and rats, and bend promises into curses. Magic is all in names and words, agreements and sacrifice. It is not a proper thing to do. People are afraid of what they don't understand. 

The spells and rituals etc would be more subtle and toned down. Instead of fire balls raining from the sky there would be scrying through a bowl of water or any other fortune telling method. It could also include creating protective amulets, curses, attracting wealth, love spells, healing. I also think magic and religion could be a separate thing. One who practices magic doesn't necessarily has to be religious and vice versa.