The wizarding world's reaction would be quite diverse. There would be those who value creativity and freedom of expression, like many of Harry's friends and allies. They would be outraged and would probably try to protect the fanfic creators. On the other hand, the more traditional and strict parts of the wizarding society, similar to the Ministry under Umbridge's influence, might see it as a just action against what they consider 'unacceptable' content. But overall, there would be a significant outcry from the more open - minded sections of the wizarding world.
Well, the younger generation in the wizarding world, who are more exposed to different ideas and are more inclusive, would most likely be very angry at Umbridge. They might organize protests or boycotts against her actions. Some older wizards and witches who have a more open view of things might also join them. However, there are bound to be some old - fashioned and prejudiced wizards who would think Umbridge is right. But the reaction from the majority of the wizarding world that values art and creativity would be negative towards Umbridge's abuse of the fanfic.
Some in the wizarding world might be appalled by Umbridge's actions. The more liberal - minded wizards and witches would likely support the creators of the fanfic and condemn Umbridge. However, there could also be those who are more conservative and might side with Umbridge, believing that such fanfics are inappropriate.