I would agree that the skip option is something I wouldn't do. Likewise, freezing time for reaction would take me out of the game even more. Call me a masochist, but if it's there in the game, I have to play it just so the game doesn't defeat me. Seir's ideas of having it be shorter is nice, as well as possibly having an adventure mode.
Honestly, though, my advice about tweaking the battle is this: Cut it entirely. If you want a game to have an RPG element, do an unofficial sequel to Quest for Glory. Or use the ideas in a new game. Don't try to graft it to King's Quest, particularly when you have so much more story to tell. You like RPGs, that's fine. But King's Quest is not an RPG. This attempt to combine other non-adventure elements to an adventure game is one of the reasons why Mask of Eternity was so maligned.
Look, I understand that these fights are your babies and that you want to infuse something new into King's Quest. But firstly, you're doing this project because King's Quest has endured on its own due to great gameplay and nostalgia. It doesn't need a shot of the modern and other genres to keep it relevant. The fact that you can make an unofficial sequel to it and people will play it means it's relevant enough. The fact that AGDI and IA already released great games means that the series doesn't need revived. Secondly, while cutting the fights might sound extreme, it's not without precedent. You guys have made it clear that this game was originally going to be massive with a lot more visitable areas, more plot points, and so on. You had to cut those because there wasn't enough time, it wasn't feasible, and so on. I'm sure some of those plot points were your babies too, but you cut them for the good of the game, because you realized that the game, as originally envisioned, just wouldn't work because it was too big. You can still use those ideas and concepts in your upcoming commercial games. So there's a precedent here and I feel I can offer this suggestion without coming across as a jerk. Cut the battle. This isn't the game for it. And in this final chapter where so many plot points are still to be fully resolved and explained, it's really not the place for it.
And again, I'm not emotional about this. You're not raping my childhood, you're not killing King's Quest. But you are making an uneven game. Cut the battle. That's my suggestion.