Did something out of the ordinary happen during the first fight? The variable should have changed right after u left combat.
Uhh... there may have been an error when I beat him, actually...
I could try and replicate it and send you the log, if that would help.
Edit - ran through the entire patch again just to make sure - no error popped up this time, but flag wasn't changed, it seems.
It just loops back to first fight regardless.