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How exactly does the fight minigame work? I was just exploring the game to see everything, but got stuck at the lizard fight, even raised my strength to over 250 and it didn't help.

There's 3 spots to click corresponding to where she's about to attack or how she's blocking, you should be able to figure out where to click and when after a bit of trial and error.

If you attack, avoid attack the part her arms defended; If you defend, look carefully about her tail and arm, slight move of tail means she will attack your head, big move means your leg and move of arm means chest(It may not exactly what I said, but you will find the regulations after receiving a few hits) BTW, strength point just a qualification, not your force, means it is helpless to improve your damage or defense.