(Spoilers) After all the dire warnings from the female warrior by the steps leading up to the Demonknight's lair, I would have expected one hell of a fight. Here's how I handled it.

I sent my best tank forward, so that he'd be targeted first, and of course he had a protection from magic scroll activated.

All five of my other members, hasted, stayed on the outside and I hammered him with slings, two bows, and a crossbow. The Demonknight was unable to cast any magic, or use his mirror. He did get off one fireball, but since my tank with a ring of fire protection was the only one in range, it did almost nothing. The Demon fell within about eight seconds of real time fighting.