Brand new DM running my first campaign here.  Decided to run a homebrew one a while ago, and our start date just happened to be last week.  Perfect timing.  I have a pretty good plan for the actual story, but my group (all far more experience than I) loves to play odd characters.  

Example from last week (first session):

-Old druid woman (ODW) charges bandit in the first combat encounter.  Forgets to prepare any spells.

-ODW begins attacking the bandit with her staff (-1 strength modifier).  In a group of all casters, she is now the tank.  She makes an attack of opportunity as the bandit turns to run, hits, and rolls a 1 damage.  Which makes it 0.  Decision is that she hit him in the balls.

-Group of guards from the nearby town captures the escaping bandit, escorts everyone to the town.  Bandit is imprisoned, and the garrison is informed of the groups actions, including the epic ball shot.

-ODW then rolls a nat 20 on a constitution check after accepting a challenge to an eating contest with a massive orc.  Wins the contest.  People are duly impressed.

-Dragonborn in this setting value clever punishment, and some of the guards, all who heard about these events secondhand, are dragonborn and have ties to the royal family.  They view these as signs that ODW is a very wise, almost holy, woman.  She's actually pretty much just a crotchety old cat lady.

Question is, this has the chance to dramatically change the ways that the party is viewed, at least by one faction.  While this would be fun, it would also force a pretty big rewrite of the progression, and I'm not sure how well I'd do at pulling it off on short notice. It also could be played down, since the PCs don't have a clear idea of the politics yet.  I'm very tempted on the prep side to play it down.  But at the same time, the opportunities for RP are so good.

Thoughts on how to proceed?

Go with the flow. (N.B. Not sure why ODW got a "ball shot": if it was a crit, fine, but otherwise zero is zero - the blow struck a tough part of the bandit & bounced.)

Anyway, as things stand ODW has stories of prowess going around. Local martial artist may take this as a challenge -she's obviously a monk of some kind! (Certainly not behaving like a druid!)

And that orc she humiliated? Hows he going to get his revenge?

The players will give you opportunities to develop the campaign,  just choose the options you fancy.

I realize this isn’t what you asked, but I can’t get past it. How did the Druid not have her cantrips? Like shilleigh in particular, but any cantrips would do better than Just melee. 
And like the others said, don’t make a plan contingent on the players acting a certain way. Make a plot, and figure things might happen without them, then find ways to introduce them to those complications. Eventually they’ll find some reason to involve themselves in it. Or they won’t and the BBEG will win, then on to campaign 2 in a post-apocalyptic setting. 

My rule 1 of being a DM. Players will break the campaign. I have several paths that the characters can take that will ultimately lead them to the place I want them to go. 

You mentioned letting them continue on this path would cause a re-write for the progression with that faction. Well, isn't there a competing faction who would have serious issue with their opposing faction gaining new allies. Then this new faction can pick up the story that the party deviated from. Not saying it would have to be exactly that but those types of "outs" or "re-writes" are easy to work in, still give the players their freedom and still lead them to the goal you've set.

For a sliiiightly contrasting viewpoint, if you WANT things back on the rails, I would think a ten minute conversation with the crazy cat lady would convince any NPC or faction that she's not a wise, holy woman, she's just a mean old lady.  They might laugh at her antics, but business is business.  That sets you back at square one.  I wouldn't consider that railroading or stifling player creativity.  

Since the PCs don't understand the politics yet, it sounds more than anything like YOU'RE enchanted with the notion of upending things, which I get.  You want to "yes, and" your players.  It's happened to me many times.  But since they DON'T know the politics, throwing everything out of whack isn't something you're doing with them, it's something you're doing to them.

The thing about a campaign is, it's not the story the DM wrote. It's the story of the party. The players are your co-writers. Maybe more so than you are. You provide the sandbox, but they decide if they want to build a sandcastle or kick the sand all over the yard.

It sounds like, your entire over-arching campaign plot that you planned out ahead of time might be rather fragile, if one night of play with an old lady doing a couple of silly things can knock the whole thing off its hinges. Somehow, and I know it's easier said than done, you have to make a world plot that is robust to player actions. By that I am NOT saying "what they do doesn't matter and the story goes along anyway" -- quite the opposite. You need to come up with a world plotline that is capable of responding to what the players do.

For example, you are DMing the Lord of the Rings. You would set up a "ticking clock" of what Sauron and Saruman are doing. You know how long it'll take them to breed Orc armies. How long Gondor can hold out, and Rohan. You know the Nazgul are out looking for the ring, and how fast they can travel in a day. So, when the guy playing Gimli convinces the party to go into the Mines of Moria despite ALL your very obvious hints to the players that this could cause a TPK, yes, you might have to scramble to make the Moria map, but, it won't throw your campaign off. After they have spent 8 days in the mines or whatever, they come out to find a world in which Sauron and Saruman's plots have advanced 8 days.... etc.

Are the players also new?  

Not to be too critical, but once you realized the ODW didn't have spells prepared, did you stop and explain, and then let them prepare spells?  perhaps they didn't know about that as part of the character.  Did you have a chance to review the other character sheets as well? 

Finally, if things sounds like fun,  let that happen.   As a DM don't treat a campaign as a story where you control all of the beats,  you control the setting, the villain, the motivations and their actions.  Let the rest get filled in and have fun as the players come up with creative solutions to situations.

(or at least try to,  sometimes letting go of the reigns is hard, and it takes time and trust within the group)

I agree with what a lot of people have said here, that you should try to have some plans for when (not if) your players do something you don't expect -- because that's what a lot of players get a kick out of.

However I want to disagree with the idea that the DM isn't a storyteller.  If what you want to do is tell a great story, go for it.  Some of the best games I've run have come from a place like that.  What you need to be sure of, though, is that you and your party are on the same page.  If you let them know that you have a really cool story to tell, (and they want to hear the story) they'll be much more inclined to go with the flow as you present it, rather than bucking the plot altogether.

Ultimately it comes down to communication between you and your players -- it sounds like you might be slightly on different pages, and as you can probably see from lots of other experienced DMs in the comments, being on a different page from your players is the quickest way to a disappointing campaign.

Quote from DarkArbiterDM >>

However I want to disagree with the idea that the DM isn't a storyteller. 

It's not that the DM is not "a" storyteller... it's that he's not "the" storyteller, as in, the only one at the table. The players are your co-writers, and they decide a lot of what happens in the plot.

Or, how about we put it this way.  He’s the storyteller, not the story writer.  He tells the players how their interaction (writing) have affected the setting and the plans of the BBEG.  The plans and motivations are as much setting as the landscape. How the players go about interacting with those motivations is the story. 

I would just "accept" that your setting has now changed, and that this ODW is now considered a wise holy women by these people. This happened in-game and it sounds like fun. "Playing down" events that happened in-game and "changed" the world is essentially taking away the players chance to be a part of the story. This is now a "fact" in your world, use it to create fun.

I disagree with you when you say: "She's actually pretty much just a crotchety old cat lady." No, she's not that. After that session she is an old druid woman who is regarded as very wise and holy by a certain group of people. Perhaps they are right (or perhaps not). But ODW IS one of the protagonists of the story you are telling together. If her quite weird actions leads to this, accept that as part of the world. Of her inner and deeper understanding of the world.

I would not keep "challenging" her to rolls until she "fails" and thus falls from grace. This is just a way of using dice roll to force your world in a certain way. When such strange events happens (and they don't happen and is followed up by dice rolls that often). Allow them to change the world. Accept it as a fact, and see how your world is now changed.

As the DM, you control the global population, the monsters, the “bad guys,” heck, even the sun, the moon, and the weather. What you don’t control are the players, or their characters.

As a DM, I never “write” the story. I created a setting, populated it with characters that have their own ideas, drives, and motivations. Some of those characters set their plans in motion (note I didn’t do it, they did) and then I explain to the players what their characters perceive of the situation. They make decisions, I tell them how the situation changed in response. Note, I didn’t change the situation, they did, I just described it to them. I figure out what the world does next, end explain that. 

My point is, the players write the story of the campaign I DM, not me. I don’t see myself as a “storyteller,” just the narrator and arbiter of timing and physics. My suggestion is, don’t “write a campaign” for your players, populate a setting with dynamic, motivated NPCs and situations, and let the players write the story of how they interact with those NPCs and situations.

And now, for the single best piece of advice I can ever give any new DM, watch this: https://m.youtube.com/watch?list=PLlUk42GiU2guNzWBzxn7hs8MaV7ELLCP_&v=e-YZvLUXcR8

I can't judge which is right or wrong way to do things. However, my own way to DM is that I have prepared at least part of the "main quest" but all "side quests" come from players. Sometimes I even say to the players like "Ok, you can go there but I am not prepared for it so we need to improvise together."

 ... or "you can go there but I need a couple of weeks to prep..."

I’d rather be surprised in session. But I’m okay with that because my understanding of what’s going on in the world is not directly linked to what the players do.

Say for instance I realize that in town X there’s s a BBE planning to summon a Demon or whatever. I placed the clues where they would rightfully be. Maybe the PCs never find those clues, or they do but the players don’t follow that thread and decide to go do something different. That BBE is still gonna summon the demon or whatever. When the PCs get back guess what, they hear that a BBE somewhere summoned a demon. They might decide to go deal with that, they may decide to go do something different. That BBE’s plans continue regardless. Those events only become part of “The Campaign” when the players decide to pick up those threads. Meanwhile, who knows how many other things are happening that they might never even hear about, but I know they’re happening. The events unfold however they will, but the Players “write the campaign.” Does that make sense?

Does that make sense?

Yeah. Most of the answers here make sense in the way that I kind of understand what people are trying to say. However, the OP's question was essentially "should I rewrite what I've planned for this campaign or not" based on something that happened during play.

My answer to that would be "YES".

Don't care if someone calls it storyteller and someone don't. Just lay out the foundations for the best possible story. My experience is that when you allow what players do while playing have an actual impact on the world, that is memorable. Going back on such moves, usually just creates disillusioned players. They simply (and rightfully) start to think: it doesn't matter what I do. It will revert back to normal anyway until the DM decides otherwise. If you do that, you will miss what I love the most about RPG's, both as a player and as a DM. The creation of a story nobody actually saw coming.

Yes, that! 

Are we misconstruing what is happening then?  If "anything goes" because the players "control" the game direction, and the players end up doing things unrelated to the planned campaign, is it even a campaign anymore?  Dictionary definition of campaign "Campaign is defined as a series of organized actions which are done for one purpose."  Campaign=purpose, end state.  If the story shifts outside of the purpose of the campaign then are you going to be able to reach the end state (campaign goals)?

Can't believe I even wrote that. Now my brain hurts...

Quote from Shadeflayer >>

Are we misconstruing what is happening then?  If "anything goes" because the players "control" the game direction, and the players end up doing things unrelated to the planned campaign, is it even a campaign anymore?  Dictionary definition of campaign "Campaign is defined as a series of organized actions which are done for one purpose."  Campaign=purpose, end state.  If the story shifts outside of the purpose of the campaign then are you going to be able to reach the end state (campaign goals)?

Can't believe I even wrote that. Now my brain hurts...

 In an RPG-campaign I would say purpose=the purpose of the players. If that purpose changes and bring them "outside" of what the DM has planned or is written in the campaign-book, so what? It is still a campaign, it still has purpose. 

Quote from Shadeflayer >>

Are we misconstruing what is happening then?  If "anything goes" because the players "control" the game direction, and the players end up doing things unrelated to the planned campaign, is it even a campaign anymore?  Dictionary definition of campaign "Campaign is defined as a series of organized actions which are done for one purpose."  Campaign=purpose, end state.  If the story shifts outside of the purpose of the campaign then are you going to be able to reach the end state (campaign goals)?

This is why I gave my players a couple of choices of campaign before we started. They chose "Roman Empire." In fact of the two campaigns I told them that would be the one with the least freedom to "do anything," because, among other things, the Roman Empire is large, powerful, and has strict laws, and the punishment for violating most laws in the Roman Empire was execution. The 2nd option was much more free and open-ended and "players write the story." The Roman one has a strong world story that they can choose not to engage with if they want, but is going to happen on a timeline so whether they engage with it or not certain things will occur, and eventually they will not be able to ignore them (because the whole Empire will be affected).

The willingly, I would say enthusiastically, chose the one with the greater restrictions and more defined set of story elements. Given that they chose to do this, I expect them to willingly do things that are related to the planned campaign story. Now, I'm not going to control what they do, of course. But it would be pretty inconsistent for them to say "We want to do this story about the impending fall of the Roman Empire," and then ignore all the stuff I provide them about what is making the Empire start to fall.

By giving them a choice, I have a situation in which all the players have bought in to the campaign I was planning to run, so although they will absolutely do things that surprise me, and I will certainly have to make lots of adjustments on the fly, what probably won't happen is them saying, "We don't care about this campaign stuff you are doing let's do something else."

So... my advice is, before you even start, come up with at least one other idea, maybe 2, that you also would enjoy running (make sure you would, because the players may pick something other than your "baby," if you have one), and offer these choices to them and see which one they pick as a group. That will show you right off the bat what their preferences are, but also creates buy-in.