A much higher resolution video than the one from the news (Warning! This version of the video actually shows her getting shot, so if you don't want to see that, stop it at around 11:08):
https://www.youtube.com/watch?v=oGIS1Knpvs0
Based on the news reporting this is what seems to have happened:
1. She indicates she has a gun.
2. Officer Derr attempts to restrain her. He eventually tackles her to the ground. At this point he realizes that while she doesn't have a gun, she does have a large butchers knife.
3. Officer Derr gets off her, putting a little distance between them, and bringing his weapon to bear.
4. Other officers arrive.
5. She rushes Derr, one of the officers fired his stun gun (claims it is ineffective), the other two open fire.
I think the key to this tragedy is point 3. Officer Derr made a serious mistake releasing her when he realized she had a close range weapon. He was in a position that would make it incredibly difficult for her to use it on him, and his retreat only put him in more danger. In other words, even if he felt he had to maintain his distance, the distance he chose was far too short. He was in much more danger now than he was on top of her. Then, when she rushed Derr, Officer Duffie used his stun gun. Now here I call bullshit on the report. Her rushing, Duffie stun gunning her, and the other officers opening fire all took place in the span of about 1 second. There is no way in hell the cops could tell the stun gun "didn't work". For all intents and purposes, they opened fire with the stun gun and their sidearms at the same time. This goes back to Officer Derr's mistake. I don't fault the officers who fired their guns in that moment, but if Derr had either stayed on top of her, or retreated to a further distance, this whole thing could have been avoided. If he had retreated farther, they wouldn't have only had a split second to react to her charge (or she might not have tried to charge).
Overall my conclusion remains unchanged from the less clear video: Officer Derr really screwed up his handling of this, and that lead directly to the situation where they were forced to open fire.