Ah, that was in Summer Knight. I didn't remember the soul part. Yes. Maybe Harry just doesn't know better.
As I didn't remember the soul comment, I just assumed a soulgaze can only happen from human soul to human soul, and that other souls wouldn't be compatible, just like you can communicate with your dog, but you can't understand exactly, what he says. I just put in my personal belief, that every living being has a soul. Or as stated in Ghost Story by "Mr. Sunshine" or Bob(I think?): "You are a soul. You have a body" (quote not looked up or verified, just from memory). So a wizard can't soulgaze a fae, because they have fae souls, not human souls.
If a halfling becomes fae, his soul changes to fae, too.
If a human becomes one of the Queens, it could be, that the soul is gradually changed to a fae one, but not lost in my theory.
Sorry, a bit off topic, and I am sure this has been discussed before somewhere in this forum, but I have not read it. These are just my thoughts, and why I think, the Lady's soul isn't lost, only changed when and if she becomes fae.