Hinata might be shocked at first. She has always adored Naruto, and this sudden act of aggression from him would leave her stunned and unable to process it immediately.
Hinata would be overjoyed. She has loved Naruto for a long time, so his proposal would be like a dream come true for her. She might start crying tears of happiness and immediately say yes without hesitation.
Hinata might be very hurt. She's a sensitive person, so Naruto yelling at her could make her feel small and sad. She might start to doubt herself and her abilities.
At first, Hinata's reaction might be one of shock and disbelief. She has probably never expected Sasuke to do such a thing. However, she is a strong - willed character deep down. So, she might start to plan her escape. She could use her knowledge of the ninja world and her own family's techniques. She might also try to find out if Sasuke has any allies or if there are other forces at work. She could try to turn the situation around and make Sasuke realize that what he is doing is wrong by appealing to his better nature or by using her own skills to outwit him.
Hinata's family would also have to deal with the emotional aspect. They love Hinata in her normal state, and now they have to adjust to this new form. They might start to remember when Hinata was actually a baby before and all the hopes and dreams they had for her then. Some of the more conservative members of the family might be more hesitant to let Naruto be around her, but the more open - minded ones could see that Naruto's presence is actually good for her in this state. And they would all be united in their goal to get Hinata back to her normal self.
Naruto, being the energetic and battle - loving guy he is, would likely be on the edge of his seat, eager to see who comes out on top in each death battle. He might be making bets with himself about the outcomes. Hinata, with her gentle nature, would be a bit more subdued. However, she would also be intrigued. She might be more concerned about the safety of the fighters, even though it's just a fanfiction battle. And when a fight gets really intense, she might clutch Naruto's arm without realizing it, while Naruto is too engrossed in the action to notice at first.
Hinata would likely be conflicted. On one hand, she still has feelings for Naruto, but on the other hand, she can't tolerate his arrogance. So, she would start by observing him from a distance. As she notices how his arrogance is affecting others, she would gather the courage to approach him. She would tell him how his actions are not in line with the values he once held dear, like friendship and protecting the weak. And she would hope that her words would make him reflect on his behavior.
Hinata would probably be angry too. She might be angry at the circumstances that led to Naruto's death, whether it was an enemy or some other misfortune. She could direct her anger towards training harder, vowing to become stronger so that she can prevent such a tragedy from happening to others in the future.