There was indeed a band of red-haired brigands (Gwylliad Cochion Mawddwy) who murdered and stole cattle in the upper Dyfi Valley area many centuries ago. They hung out in a wood a few miles east of Mallwyd, called Coed y Dugoed Mawr (Greater Dugoed Wood) which is situated in Cwm Dugoed, the valley leading east from Mallwyd. They were eventually dealt with by a Baron Lewis Owen, who was instructed in 1554 to stamp out their activities. He captured a large number of them and, despite the pleadings of their mothers, had them hung on the spot. There's a burial mound not far away at Collfryn which is reputed to be where they all ended up, although some spoilsports would have it that it is centuries older than this little episode. Oh, by the way, this wasn't the end of the matter, of course, as the Baron in turn was murdered the next year in retribution at a place nearby which has ever since been known as Llidiart y Barwn (Baron's Gate). You can read more in Thomas Pennant's Tour in Wales, written in the late 1700s, if you can find a copy, where he reports that "the traditions respecting these banditti are still extremely strong...the inhabitants placed scythes in the chimneys of their houses to prevent felons coming down to surprise them in the night, some of which are still to be seen today". Pennant is quite dismissive of Dinas Mawddwy, saying that it "consists but of one street, straight and broad, with houses ill according to a Dinas or city". To this day there's a hotel nearby called Brigands' Inn, which used to be run by close friends of my family.

See  http://www.rootsweb.com/~wlsmer2/DolgaLLan/tudur.htm for more detail on the legend.

Wealthy Edmund Buckley (1834-1910), latterly Sir Edmund Buckley, 1st Baronet of Llandovery, MP, arrived on the scene at Dinas Mawddwy from Manchester in 1856. His uncle had bought the estate from the Mytton family, and on his death Edmund inherited it. He poured money into the building of a grand house (Y Plas) which was completed by 1872. He bought up large tracts of land and expanded the estate to about 11,000 acres, and also part-funded the building of the 6.75 mile standard gauge Mawddwy Railway, which connected with the main Cambrian line at Cemmaes Road. The railway opened around about 1866, and in 1868 Edmund was made a baron. He contributed much to the well-being of the area, sponsoring various new buildings and services, including a hotel at Dinas which was named in his honour - the Buckley Arms, now re-named the Buckley Pines. He became deeply involved in local slate quarrying, which for a time seems to have been profitable, and an important source of local employment. However, a downturn in the industry and a failure of some of his other business interests led to his financial downfall in 1876, and most of the estate was sold by 1883. His son, also named Edmund, established the Buckley Otter Hounds, which it seems had a fair degree of fame, and produced the first Welsh Terrier Dog Champion - "Buckley’s Mawddwy Nonsuch" - at the 1888 Kennel Club show. The Mawddwy Railway fell into disrepair and, despite an attempt to resuscitate it, closed in 1908. It was revived in 1911, too late for Sir Edmund, who had died a year earlier. In 1917, the Plas burnt to the ground, having been unoccupied for years. The railway was taken over by the GWR in 1923, but passenger services ceased a few years later, and the line was closed in 1951.

Take a look at http://www.genuki.org.uk/big/wal/MER/Mallwyd/DinasMawddy1851/index.html, where there's a breakdown of the 1851 Census for Dinas, showing who lived where, occupations, ages, etc.