To let her go is to cause ongoing pain to way too many people. She should have tried to hurry and cut her more, rather than pose or talk. Seriously, she killed the kraken after only short talk, yet here she let's the other person go because she has "hostages"? Even though the protagonist literally is able to remove curses?
Seriously, if the enemy is too busy trying to avoid getting killed by you, they are too busy to be able to make any use of the hostages.
Now I understand why the rating for this series has dropped. I don't mind the last chapter. It fits the enemy personality, and it is the first time the protagonist has really been put off guard. But this letting the clearly pure evil enemy go is a tired trope that should die.