I have tested this for 6 hours.
The only way I have been able to trigger the regular fight with the hag, Is if I have let her have my or one of my party members eyes! This will trigger a cutscene just as you enter her "gallery"? the place with the wooden door, screaming person, cauldron and mirrors. I tried for ages making it work in different ways, but no..
Also when she reaches 10hp and gets her turn, she will negotiate for her life, and offer an ability point. I guess this is also broken, you just receive a clump of hair, you also receive a clump of hair when leaving the lair using the teleporter. Neither gives any ability points.. Did she just fool me? I guess it's meant to actually give an ability point, cause when you exit the lair using the teleporter, a placeholder "mission accomplished" pops up, and you get to choose from 6 rewards, I'm guessing 1 for each ability score type.