  In an earlier article we introduced a new definition for the `quantization'
of a Hamiltonian loop group space $\mathcal{M}$, involving the equivariant
$L^2$-index of a Dirac-type operator $\mathscr{D}$ on a non-compact finite
dimensional submanifold $\mathcal{Y}$ of $\mathcal{M}$. In this article we
study a Witten-type deformation of this operator, similar to the work of
Tian-Zhang and Ma-Zhang. We obtain a formula for the index with infinitely many
non-trivial contributions, indexed by the components of the critical set of the
norm-square of the moment map. This is the main part of a new proof of the
$[Q,R]=0$ theorem for Hamiltonian loop group spaces.
