Yes it is quite possible and easy to save them all. You cannot save any of the prisoners in her lair prior to the fight as removing the mask will kill them since she is actively holding the spell on everyone. So you have to fight and kill Ethel to break the spell.
My advice is spread out all 4 members around the hole in the center, give them ranged weapons and just ignore the masked people. Priority is Ethel and her clones. If she duplicates Mayrina, you can find the proper one by inspecting them both and comparing the stats. After that she won't duplicate anymore and you can just converge all of them on her and deliver the killing blow.
I did it with all kinds of party compositions, even a full melee one. And the fight can be made even easier with ranged scrolls and familiars such as Ravens or Imps if required.
If you're interested here's a video I made for a bug report, but it shows it actually dealing with her and saving all 4.
