Somehow i didnt experience this LOC bug in Act I, although i seem to encounter it more frequently in Act II. but then i didnt have much use of bombs before i met Letho ;) I guess this was one of the rare instances where everything worked perfectly.

i was just about to post that. :D

anyway, i always have 2/2 in footwork before that battle, and if you have 2/2 in parrying from the training tree then it's super-easy. dodge around till quen wears off, then close in and block with E. he gets knocked back, you do a heavy blow. eventually after doing this 4 times or so he'll aard you away. rinse/repeat.

I didn't find him too hard even on Hard. The thing that kills me more than other is the incineration DoT from his Igni.

One thing that will help out a lot is to down a few potions before fighting him (choose not to follow Iorveth straightaway). I invested 2 points in dodging which combined with WASD I can evade most of the things he throws at me and sometimes backstab him while he is still executing some combo.

Another thing which is always helpful when fighting an enemy straight-on is to cast an Aard and follow up with 2-3 strikes and roll back, rinse and repeat. However if you cast Aard and want to move forward there is a pause which gives time for him to recover.

What OS are you using, and is it 32 or 64-bit?

Playing with a keyboard isn't inherently laggy, which I know because it's what I use. That being said, certain keyboards can cause a problem, but it seems pretty rare.

"Letho in the bathroom was too easy" is a wonderfully salacious title, OP :)

Wait, I'm at this point now. I either die and have to reload, or I get his health bar down to zero and a cutscene follows where he defeats me.
Is there a way where he actually dies here?

Nope. Even if you completely pwn him.

No. There are higher powers (the devs) at work here. And you only need to reduce his health by half before you are allowed to be defeated and proceed with the plot.