I'm pretty happy with the way this went. So I think it's probably the right hand to get feedback on because I'm probably not ready to see my own mistakes when I'm feeling chuffed.

Villain is passive; probably a bit loose.

My thought process was basically an interpretation of the bets as the following conversation:

Party Poker No-Limit Hold'em, $ BB (9 handed) Hand History Converter Tool from FlopTurnRiver.com (Format: FlopTurnRiver)

CO ($4.09)
Button ($3.28)
SB ($5.79)
BB ($5.61)
UTG ($3.27)
UTG+1 ($15.27)
MP1 =Villain ($8.72)
MP2 ($6.09)
Hero ($3.44)

Preflop: Hero is MP3 with K, A. SB posts a blind of $0.02.
UTG calls $0.04, 1 fold, Villain) raises to $0.08, 1 fold, Hero raises to $0.25, 4 folds, UTG folds, Villain raises to $0.42, Hero calls $0.17.

Villain: "I have a nice hand, it's so nice I went to all the trouble of clicking on the minbet button".
Hero: "Behold! I have both a nice hand and the ability to type my own numbers. Tremble in fear!"
Villain: "Shan't. I've just found the place for the typing-in-thing. So have at thee!"
Hero: "Okay, let's see how you like it after the flop."

Flop: ($0.94) 8, A, 7 (2 players)
Villain bets $0.04, Hero calls $0.04.

Villain: "Oooh. Erm. I don't have an ace. Do you have an ace?"
Hero: "Who, me? Nah".

Turn: ($1.02) 8 (2 players)
Villain checks, Hero bets $1, Villain raises to $2, Hero raises 0.98 (All-in), Villain calls $0.98.

Villain: "*snigger*, Oh geez mister, I HOPE YOU DON'T BET"
Hero: "Well, if you're sure you don't want to bet, here you go!"
Villain: "Aha, surprise! I was fooling. I do have a good hand!"
Hero: "Oooh what a shock. Well, I've got another dollar almost, want that too?"
Villain: "Yes! Yes! You feel into my trap... erm... twice."

River: ($5) 2 (2 players)

Final Pot: $5

Results in white below:
Villain has Qc Qd (two pair, queens and eights).
Hero has Kh As (two pair, aces and eights).
Outcome: Hero wins $5.

If villain had flipped over AA I'd have had to revise this script somewhat.
If it had been A7, I'd not be that surprised given some of what I see on these tables. (Example. I bet AQ at 6xBB and got called by J4sooted who then went on to call my flop bet because he hit a 4).

All that said, I can empathise with villain. I think the reason I could see what she was doing is because I'd play it almost the same way (only better raise pf and stronger c-bet).

What tips for us about playing these hands?

Oh as an addendum: Villain bought back in and I'm guessing was on a bit of tilt or was desperate for me to pay her back:

Party Poker No-Limit Hold'em, $ BB (9 handed) Hand History Converter Tool from FlopTurnRiver.com (Format: FlopTurnRiver)

BB ($4)
UTG ($6.52)
UTG+1 ($3.96)
MP1 ($3.55)
MP2 ($4.88)
MP3 ($18.13)
CO =Villain ($4.94)
Button ($6.64)
Hero ($6.74)

Preflop: Hero is SB with A, Q. Hero posts a blind of $0.02.
UTG calls $0.04, 2 folds, MP2 calls $0.04, 1 fold, CO =Villain) calls $0.04, 1 fold, Hero (poster) raises to $0.23, 1 fold, UTG folds, MP2 folds, CO =#A500AF(Villain)/ calls $0.21.

Flop: ($0.62) 6, 9, 7 (2 players)
Hero bets $0.3, Villain calls $0.30.

Turn: ($1.22) A (2 players)
Hero bets $1, Villain calls $1.

River: ($3.22) A (2 players)
Hero bets $3, Villain calls $3.

Final Pot: $9.22

Results in white below:
Villain has Qh 6c (two pair, aces and sixes).
Hero has As Qd (three of a kind, aces).
Outcome: Hero wins $9.22.

Revenge is a dish best served cold. Not steaming.