Hellhound can be found in the fire floor of the dungeon in Old Ashton. You will have to fight her.
From now on, Hellhound will appear at random locations and can be spotted at some events. The most significant ones are the encounter with the boss of the Advanced Dungeon in the Spire of Courage and the events with Kippy in Dorgania.
After freeing the wyvern Leneth, Hellhound can be found in the cave of the Academy. Talk to her to unlock her first CG scene.
Her next scene requires you to have unlocked both Hellhound and Leneth's scenes. Talk to her in the cave to get the new scene.
Hellhound next step is unlocked only if Leneth gets pregnant. There is a 25% chance that she will appear in the Aldlyn Castle secret room every time you use the Teleport Orb. Talk to her to get her third CG scene.