The way it should work is, If you beat the rabbit in it's low level form it will trigger a fight with a level 99 version that will 1-shot you. Did it not spawn correctly in your playthrough?
Viewing post in Phoebe's Dungeon Soft Lock (Pickable but tedious)
That's what I thought was supposed to happen, but I was stuck in this loop where I beat the low level form, then it would take me back to the dialogue at the beginning of the event where I'd have to make the choice between "who are you" and "get out of my way" and enter the fight again. I think I defeated the rabbit about 6 or so times before I started to wonder if I was doing something wrong lmao