The best way I've come up with to defeat Xydussa is to cast every buff spell you have. Then, before she has a chance to use her gaze attack (green Lightning Bolt) run and hit her with melee weapons. Try timing your hits so that they hit her just as she rears back to strike. With practice and a little luck you can get through the fight without even being touched. Even your magic-users should use their weapons. If you can't hit her as she tries to strike, instead, retreat a little and she won't hit you (one of the few times you enjoy seeing the OUT-OF-RANGE message in the text box). It may take a couple tries but you'll get it eventually. And don't worry, fights like these are quite rare (this is the hardest fight in the game IMO). Good luck! Let us know how you do!
-Jafin
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Arch-Mage of the HADB
Destroyer of the evil Bunnies
Guardian of Boo and best friend of Minsc