I just tried this strategy out and found it greatly effective against the death gaze of that Tanar'ri demon. I have searched the forums before for death gaze protection and found people suggesting using potions of freedom and mirrored eyes, dispel magic and so on. But I think what I'm about to say is more effective, lasts longer and is economical. (Please do pardon me if this particular strategy is discussed already in any other thread. I really think this one is different).
So, I'm playing the cannon good party. Before descending downstairs in the cult building, I used potions of freedom on everyone and vocalise on Dynahier and my cleric/illusionist PC. That's the common thing. Then I used DEATH WARD (4th level cleric spell) on everyone. I had my PC and Jaheira cast it. And it's absolutely effective against the death gaze of Aec. The great thing about this spell is that it lasts 1 turn/level of the caster, whereas potions of mirrored eyes last only 10 rounds (that's 1 turn). My clerics were now on level 7, so it offered long lasting protection against the death gaze. Then I simply went about doing the regular thing, marching downstairs, killing the cult guards and Tracea Carol, while Aec helplessly gazed at my party members, with no effect. Once I'd done with them, I killed the demon. One final IMPORTANT step was to cast dispel magic, as by the end of the fight, the death ward spell seemed to wear off. (On my first play it turned Imoen into a ghast after the demon was killed, so on my second play I took no risks and cast dispel magic on everyone). Great things about death ward is that it's long lasting, saves you the cost of buying potions of mirrored eyes, is not affected by dispel magic and provides you particular protection against that nasty demon's gaze. Do remember that one still needs potions of freedom to avoid being paralyzed. That's all, folks!!
EDIT: I was wrong about the dispelling part. Death Ward 'can' indeed be dispelled (although it's really a matter of chance). Thanks to @Aerakar for pointing this out.
Best you kill the mage by backstabbing her or somehow else, before she can cast dispel magic. I am not totally sure, but I don't think Aec casts Dispel Magic (at least I did not see him doing that).