"Fair is foul and foul is fair" this relate to what the witches say/ prophecies? How does appearance vs reality connect with this sentence?
In real life, we should not judge people on their appearances. There are many people who look trustworthy but are not. The witches do not look truthworthy yet macbeth trusts them. Is this Shakespeare's version of reality vs appearance?
"Fair is foul and foul is fair" relates to the witches' prophecies because it is a statement of paradox and inversion. The prophecies are true, but only in part, and end up being to MacBeth's detriment and final demise. MacBeth believes the prophecies to entirely be true, but doesn't get the fact that foul is fair and fair, foul. He takes the prophecies as literally true. He doesn't see that he is the foul one, and that when the witches say "something wicked this way comes," they're talking about what he's become. You have it mostly correct, however. The statement is about appearances and reality, but also about how these two can change. MacBeth is heroic soldier at first, but becomes "foul." Lady MacBeth is strong and vicious at first, but becomes mad later.
I think In fair is foul and foul is fair, it is trying to say that things that look beautiful can be ugly and things ugly might seem beautiful but it isn't the way it goes.