Well, here's my attempt to clarify a lot of what's been said already into one post.
First of all, as Theory mentioned, you don't need to put EVERY kingdom card that isn't being used into the Black Market deck. That was a just a suggestion that came with the rules, if I remember correctly. So you can simply choose not to use Young Witch at all.
Secondly, the Cornucopia rules state that if Young Witch "is in the game," create a Bane pile. It doesn't restrict it to being in the Kingdom only. So if Black Market is chosen to be in the Kingdom, Young Witch would be known to be in the Black Market deck, since that is chosen beforehand; therefore, it'd require a Bane pile to be set up....Actually, I just finished reading the paragraph in the Cornucopia setup, and it specifically mentions using a Bane card with Black Market. So that's settled. Again. By the way, the rules also specifically mention putting out the Prizes if Tournament is in the Black Market as well.
If Young Witch is in the normal Kingdom, a Bane is chosen, which means that card now is in the supply (and applies to game-ending conditions, etc., as the rulebook states). So if Black Market is in the Kingdom, the card that has been chosen as the Bane cannot be in the Black Market since it already is in the game. If Young Witch is not in the Kingdom, but Black Market is, a Bane is still chosen (provided Young Witch is in the Black Market deck, which doesn't have to happen) and placed in the supply, which means that the Bane is no longer in the Black Market. Bottom line: there's no way to have a card in both the supply and the Black Market deck.
My question here is if you can have a situation where the 10 normal cards are neither bm nor YW but YW is in the BM and BM is the bane, so each one justifies the other but the entire loop is unnecessary.
This cannot happen. If neither is in the Kingdom, there is no Black Market deck. The only reason for Black Market to be the Bane is if Young Witch is already chosen as one of the 10 Kingdom cards. If Black Market then is chosen as the Bane, Young Witch could not be in the Black Market deck since it's already in the supply.
The only thing that isn't specified in the rules is if there isn't a $2- or $3-cost card from which to choose for the Bane. But at that point, players probably would be willing to swap in a different Kingdom card with one of the $2- or $3-cost cards in the Kingdom. Every expansion has at least a handful, so there's no way that $2- or $3-cost cards would not be available.
On an unrelated side note, I know it was mentioned in another thread, but if a reaction card is the Bane card, you would get its reaction ability first upon revealing it, and if that Bane/reaction card is still in your hand, you could block from receiving the curse. I believe you could just choose to reveal the Bane/reaction card from your hand to block the curse if its ability would result in it disappearing from your hand, though I'm not sure there's a reaction card that both blocks a curse and gets set aside at the same time, anyway. Although interestingly enough, if Lighthouse is the Bane, having it in your hand or in play from the previous turn would block the curse....But I digress.