what is happening at the end of the story when madeline usher appears?

This is open to interpretation. Usher is a Gothic tale, plain and simple. The elements that Poe pours into it have all the tell-tale signs. You have a haunted house, dreary landscape and mental instability. It is the latter that put's Madeline's existence up for debate. Roderick is not, so to say, "firing on all cylinders". He is sick, paranoid and emotionally unstable. This instability slowly flows on over to the narrator. We begin to see in his writing certain changes that mimic Roderick's anxieties. If we also consider the fact that Roderick and Madeline were twins, their connection so close, perhaps we can surmise that the ghost was a figment of the imagination. If you don't feel so critical, you can just take it for what it seems to be. Madeline rises from the dead or un-dead to face her brother in a "mad tryst" or meeting of death.