Ok, so i wont kill her again. They could take the morrowind approach. Dont most of them just respawn if there essential to a quest. I know some never come back and the quest is gone forever.
I honestly cannot recall if NPCs respawned in Morrowind, I have not played it in probably 6 years. I am pretty sure they didn't, I remember being unable to complete the Faendal (Was that his name? Mr Wood Elf in the beginning) quest with the healing ring because I killed him.
oh and for being able to do it I meant to talk to farkas and have him give you something else to do or pay some fine maybe?
It would make sense to have some form of quest opt out if you are unable to complete the quest for any reason. They have this functionality already with the Theives Guild, you are able to drop the bedlam, sweep, etc quests without a problem.