You must find the Censor Item located on one of the dead bodies in the zone and then follow the instructions on screen when to use the censor. You need to check each of the breakable walls in the zone and if you get a message to use the censor then you use it. If done properly you will be able to click the painting in the back left corner of the zone and prevent Malkonis from leaving by pulling on the switch behind that painting.
If you use the censor incorrectly the painting will not be clickable and you will your chance to kill Malkonis. Atleast, that is what I remember from back in the day.
Looking for write up on how to properly spawn this guy, or progress the zone.