Memorise usual buffs and have 1 character with resist energy Communal, I used Camilla.

Hope you kept some weapons, equip everyone that you can with blunt weapons, the swarms resist other types of damage. I had Seelah with a heavy flail, Camilla with heavy mace, Woljif with dual light hammers, kept Lann with a bow since theres not much point for him to do anything else. I had Ember with lots of fire spells, my MC was a Sword Saint, I used a 2h maul with him for this section.

Make sure to rest up in your camp 1st.

You need to have a way to do cure serious wounds for the traveler stuck in the pit, if none of your characters other than Sosiel can cast it, you need to have a scroll or potion to do it, you can buy a scroll for it in the medic tent in your camp for like 350g.

SAVE often and before starting and always keep multiple saves in case you mess up.

The game will automatically damage your Crusader Army 1 that you started the game with and likely recruited a general in.

What you want to do is split your army, leave the shieldbearers which are among the worst units in the game in that Crusader Army 1 while moving all other units to another army, that way you will get damage on units that are already worthless and keep safe your other good units.

Positioning of the armies on the map doesn't seem to make any difference.

Now approach Leper's Smile with your main party.

Choose to send Sosiel and have him stand his ground. This should yield the lowest possible damage to your armies out of all the possible choices.

Now talk to Aneya and then buff up.

Don't click on any loot during the whole map.

Kill everything in the map except the Queen but don't loot anything and don't approach the spot with the traveler.

Now here's the trick this whole setup relies on and how this works.

SAVE before doing this.

If you use Sosiel and stand your ground, don't rescue the traveler and don't pick up any loot and just rush the queen, you will not lose a single soldier, but we want to pick up some loot.

The trigger is rescuing the traveler causes -5 morale penalty and some damage to your army 1.

If you click on any of the loot items, nothing happens yet while the loot window is open, once you close the loot window, either by looting everything or by clicking the X, it triggers again -5 morale and damage to army.

By opening another loot window by looting something else or opening the inventory by pressing I, it will close the first window you still had opened without triggering that -5 crusade morale and no damage to your troops. So what you want to do is save before looting anything, check which loot triggers the -5, then open that one first, loot everything in that window except 1 item, ideally you leave a crap item worth 2g. Then loot something else or open the inventory, closing the first window with no penalty.

Once you looted everything except a few crap items left intentionally, you can go to the traveler to the north to rescue him. Note that rescuing the traveler will give you a -5 penalty and damage your army slightly. You can choose not to rescue him if you want but he will give you a good item in CH4 if you rescue him now.

If you fail the checks to rescue the traveler reload till you get it.

Now enemies will spawn, kill them and if you have a way to use cure serious wounds you will have the choice to heal the traveler.

Move your team near the Queen but don't start the fight yet, rebuff if you need, cast resist acid communal now.

Move your looter next to the next item you want to loot.

Again open the window, loot what you want but leave 1 item and leave the loot window open.

Select your party and trigger the Queen, you will have to do the entire fight with the loot window open untill she's dead.

I was in the end able to rescue the traveler, loot the ring and the monk robe and only lost 1 single soldier doing this.