Only works once per target

The Fear (BWG p. 212) mentions that it only works once per target. Is this to say that, if Morgan the dark sorceress cast The Fear on you a year ago, and now she’s here doing it again, it doesn’t work? Or does it mean that a character cannot be affected by the spell again in that same encounter?

Correct. You’re only fooled once by the spell.

I think it would be fair to have it work again after a year and a day.

RAW, it’s once.
Fiction may, when compelling, trump RAW. If it works better storywise for it to be appended with, “until a year and a day have passed,” then approve it with the group, and drive on. Just be consistent in the campaign. Log all such house rules.