Final Fantasy Tactics Walkthrough

The earlier you can take care of the two Priests, the better.  They'll hide in the corner and heal the other members of their party if you don't take care of them fast, and it's likely that they'll have another type of support magic - like Time Magic - as a secondary skill, which can be extremely annoying and detrimental to your party. That said, though, they are also bait: if you rush melee units into that chokepoint to kill them, you will likely end up surrounded and Miluda is a heavy hitter for this point in the game.

After they're gone, you can either try to take out the remaining randoms (useful for farming chests and crystals, if your guests don't get in the way) or target Miluda immediately.  Targeting Miluda will make it much easier on you, as her defeat is the objective and will end the battle early.  If you can get a Wizard to hit her with a second-level attack spell, she won't stand much of a chance. Once she emerges, and if it's safe to do so, you'll want to block her ability to get back inside the fort. The high walls and small door mean that for a typical party at this point in the game, it's very difficult to get in there to damage her.

After the battle, Ramza, Delita, Algus, and Miluda remain on the battlefield to parley.  Algus pleads with Ramza to finish her, because as he sees it her common blood makes her life worthless once it raises arms against the nobility. Both Delita and Ramza, though, see her will and desperation as human attributes, shared by both the nobles and the commoners, and can't see a reason to kill her. Miluda scoffs at this, taking it as an insult, and limps away.