Xadoba appears to Denam as a young woman on the third floor of the Palace of the Dead. When asked why she was here alone, she claims that she arrived in a group, but that the other members of her party have all died.
In truth, she is a guardian of the Palace, a Gorgon with the power to petrify. The statues lining the halls of the Palace are actually unlucky explorers turned to stone by her magic.
After revealing her true form, she states that she was responsible for the deaths of her companions. She was defeated by Denam, but as she was dying, she hinted that he may be corrupted and turned into the next guardian of the palace. Given this, it is possible that her story was not a lie, and Xadoba was originally an explorer who was corrupted by the darkness within the Palace of the Dead.
The Warren Report supposes that Xadoba was a native of the realm of chaos, and was simply adept at manipulating mortal minds and bending them to her will.