I'm new. I'm wondering about the nature of Zuggtmoy, demon/fungus queen.

Is she a demon who has dominion over fungus, or she a fungus who is powerful enough  to be classed a demon?

Her powers seem to be restricted to a "strain" of fungus, rather than she has full dominion over all fungus.

Are demons a physical being, or an evil spirit that manifests a material form? Demons can seemingly turn to ichor I'm unclear.

Thanks

She's a demon with power over fungus, rot, entropy, and decay. Demons in 5e are Chaotic Evil (as opposed to devils, their Lawful Evil counterparts) manifestations of the Abyssal Plane, so are spirits. The Abyss is a place of constant change, chaos, and violence, and there the hierarchy of demons is determined by strength alone. The stronger a demon is, the higher level of the Abyss it controls, and demons above a certain power level are classed as Demon Lords.

Demon lords have domains, so to speak, which is how you get Zuggtmoy associated with fungi and decay, or Grazzt and his domain of hedonism and vanity, etc.

To add on, the only way a demon is destroyed is if you do it on its native plane. If you kill it anywhere else, its essence makes its way back to wherever its from and it re-forms

To add onto what Houligan said, that applies to every extraplanar entity, not just demons