How many lollipops before she does anything? Do you have to click something? Also how do you use the third house key?
After the Bridge, you entered the Sorceress' Hut. In this place you can notably buy the Beginner's grimoire (for 5,000 lollipops) and the Advanced grimoire (for 20,000 lollipops). The first one enables you to use the Acid Rain, Fireball and Teleport skills, while the second one will allow you to use the Erase Magic and Thorn Shield skills. You can click the corresponding books in the Hut to buy those. The Beginner's one looks like this:
While the Advanced one is this one:
You can also buy her Cauldron for 100,000 lollipops. You can use it to brew different kind of potions : the Health potion, the Turtle potion, the Anti-gravity potion, the Berserk potion, the P potion and the X potion.
You can also click on her hat. She will tell you that she can give it to you for a billion lollipops. If you buy it, you will obtain the Sorceress' Hat, which enhances the effect of the spells and potions you are using throughout the game.
Also, the third key you are talking about opens the Third House, which is located on the right of the Shop.