You may have found a bug; the retreat and return loop should not be infinite. To figure out what's going wrong, what dialogue are you stuck on?
Viewing post in The Dark Queen of Mortholme comments
Just after the first transformation fight, stop fighting after that, and reply "I no longer wish to hurt you", it creates a repeating loop every fight after.
"Look, I want to see you try. I want to see you."
"I no longer wish to hurt you"
"If staying unscathed was my priority, I would not be here."
"I have my purpose."
"Even if it means being killed by you a hundred times, I'm alright with that."
<FIGHTO><do nothing>
"Are you sure this is the note you want to end on?"
"I want to do this right, think about it." <retreat>
<return to start>
Oh, and if I fight after that, it repeats the dramatic holy shield cutscene.
Ceasing fighting in following fights gives "I have no need for your pity." and then loops back to "I want to see you try"
I've also gotten two minor variations of "the queen refuses to fight, dies anyway" (before first transformation, the 'respect' lines, and after, with "don't want to hurt you", then locked controls and <dead>)
Interestingly, once in the previous bugged/looped sequence, the method of incinerating the body never changes. It just stays at 'keel down and touch' and never moves to picking up the adventurer's body, even if continuing the fight sequence. Dunno if that gives any clues as to the source, but just in case it might help!