The Katana, locked in time, couldn't be transmuted. As the flames were not defended against they consumed his form, burning him massively. After all, these were not normal flames. They were the flames of a Kitsune.
The prime issue with this was not the simple burns upon Terrence's body, but that his very mind, his very spirit was now being assaulted, the connection between his body and his spirit being slowly burned away.
She deflected the whip assaults with her blade and laughed a little "Your imitation is weak, i've fought Master Jay hundreds of times in the past 8 years for fun"