I think she is a good character to have. It gives players someone to hate early on and gets people more emotionally invested in the situation. Also, Tieflings are treated like crap in most places, druid grove is a good introduction to this.
She can be killed without speaking to her at all and this method keeps the Tieflings safe (she doesn't run out to kill them). Not sure if you have to kill Nettie first or not.
For people that have a hard time with the Kagha introduction, perhaps there should be an autosave when you enter that area.
The player is not nescessarily incentivised to act on the Tieflings' behalf in this situation
I actually found more incentive to act on their behalf simply because of what happened. If the situation was just a simple bit of dislike between the two groups then I would have disregarded it entirely and continued looking for a cure. Would help them with the goblins later so I was not at risk of endangering everyone.