Traitor shenanigans with that crystal again. Too bad they couldn't catch the culprit in the act of planting it, seems it might have been there for a while already judging by how it caused the mermaid to turn into that form.
Maybe even the boss as well (or at a midboss) considering it's something that Elma doesn't know and uses trickier tactics than the regular mobs. It's nice that his Half-Dead Savage Dragon isn't an all-purpose win button and in situations like this some thinking is necessary. Not your typical "use your strongest OP skill to whack it dead" brute force fight.
If that mutant mermaid isn't the boss, then narrative-wise it's likely to be the one to deliver Maybell her needed level ups like Elma wanted, before they face the actual dungeon boss. And because he had to specifically mention she needed a couple more levels for something, I'm sure that's gonna play a key role in the coming boss fight. Looking forward to that.