Peggy wasn't always the narcissist as portrayed in mid-later seasons. I started a rewatch of the series to specific "peg" this one down.

Season 1 Peggy was the loving and supportive wife wife and mother. Not that she wasn't later on, but in the first season it's her primary characteristic. She's a pretty normal woman, although a little oblivious to her own faults.

Season 2 shows a Peggy who adds more dimension to her. She clearly has her own personality and shows some symptoms of narcissism, but still enough to write off as normal.

S3E3 Peggy's Headache shows the birth of the Peggy we all know and love/hate, where she clearly thinks she can take over the newspaper column vacancy, even after she is shown to not be up to the task. S3E6, Peggy Pageant Fever shows the full blown Peggy who thinks she can win the beauty contest that she has no real chance of winning. The conversation in bed with Hank where she rates herself is the conversation where, for me, Peggy becomes...Peggy.