I was playing this on an amiga emulator (and quite enjoying the atmosphere!), but the entire thing froze when I talked to the red-eyed lady, could not even move the cursor on anything. Anyone have the same issue or know what caused it? I will re-play later and report here if the bug persists.

Glad you're enjoying the game and thanks for the report!
A freeze like that never ever happened, neither during the development nor during the countless hours of testing (both on emulator and on a real Amiga). Also, nobody ever reported such behaviour before (or any other bug).  Therefore, I'm quite surprised and clueless.
Could you provide some detailed information, please?
What is your machine?
What is your emulator?
What are the emulator settings?
What version of AmigaOS are you using?
Did you run the game from floppy, CD, shell or Workbench?
Which OS patches do you use (if any)?
If you did not boot from floppy or CD, what other software was running at the same time?
Was it the first time you talked to the lady?
Did you talk with other characters before?
Did audio keep playing?