The Witch has really gone crazy now from stress and lack of sleep.
She demands to know what Dorothy wants and accuses her of increasingly crazy things: wanting to kill Elphaba, to steal the Grimmerie, working as a secret spy for the Wizard.
Dorothy insists that the shoes won't come off, or she would totally give them away.
The Witch starts ranting about how Dorothy is destroying her life and how she's killed everyone that matters to her.
She grows increasingly manic and starts yelling about how Dorothy is the "third Adept" and is working for Madame Morrible (5.17.18).
Dorothy is freaked and has no idea what this crazy woman is yelling about:
"You're my soul come scavenging for me, I can feel it," said the Witch. "I won't have it, I wont have it, I won't have a soul; with a soul there is everlastingness, and life has tortured me enough." (5.17.20)
The Witch sets her broom on fire and forces Dorothy upstairs.
The others rush after her and Elphaba knocks Nanny down the stairs, possibly killing her.
The Witch threatens Dorothy some more and Dorothy begs for her forgiveness for killing Nessa.
Elphaba is beyond freaked out, since she never got to ask Sarima for forgiveness.
She then accidentally sets herself on fire:
"Oh, will this nightmare never end," screamed Dorothy, and she grabbed a bucket .... She said, "I will save you!" and she hurled the water at the Witch. (5.17.39)
Elphaba feels a terrible pain, and then all the important people in her life flash before her eyes: her family, Doctor Dillamond, her school friends, Sarima and her family, her enemies, Fiyero, the people and Animals who've suffered and died, Dorothy and her companions, and the Goddess of Gifts as the last. Then Elphaba dies.