This can be a pain of a fight, but you can kill her in one hit. Grab the Razor Sword from the first floor of the Flying Fortress [1st Floor]; do not equip it!! You should have much better weapons by this time anyway. Then when you are in the battle have your Black Mage use the sword from the item selection menu, and select Tiamat. It worked on the third time for me; but when on your speed run, if it doesn't kill first turn, just reload the save.
Also do not forget to grab the Adamantite from the bottom left side of the 2nd floor! You can take that back to Mount Duergar to get the Excalibur sword for your Knight.