User blog comment:Rainb0wSprinklz/Problems with the final confrontation between Granny Rags and Slackjaw/@comment-27202257-20121231214149

I was in the same situation as you, and managed to get past the confrontation without being detected or having to kill anyone. Here's how I did it:

Wait until Granny Rags is facing the cauldron, then Bend Time (you will HAVE to have Bend Time II to make this work). Blink right behind her in stealth (crouch) mode, and pick-pocket the key. Blink as fast as you can up the stairs and into the small building. The door out will be immediately to your left--unlock the door and get inside. With any luck you'll be fast enough that, while she will start looking for you as soon as Bend Time ends, you won't be detected.