Hearthpwn

Wizard Minions: Whenever you play a minion, add a random spell of the same cost into your hand. That spell costs (1) less. If a minion has "Spell Damage", the spell produced costs another (1) less. (Spells can end up being from any class. The Coin can also be given. If there's no spell of that cost, you get no spell or an Excess Mana, debatable)

Card NameQuote from Fenixdown jump

You missed what actually happened. 1 damage from Mistress should not have dealt 8 damage to himself. So his question's correct answer is that yes, this is a bug.

 That behavior is by design. Mistress says "Whenever it deals damage, it heals the hero", Auchenai says "All heals at your side are instead damages", so Mistress went into endless recursion repeatedly damaging its owner. It's a known situation of insta-loss, and is documented on Mistress of Pain's card talk.

Last arena run was long ago

Heh. Just thinking about running another arena when having no time for games (literally) makes me sad.