Was playing a game where one character fought but had a stand off with the Eagle King in the Highlands and was sent to the crags after. The crags space had a fire token on it indicating that it was burnt. Since it was a stand off, does the character not lose a life on the space with the token on it since he does not encounter the space after a stand off? or does he still lose a life?

He will lose a life.

From the rules..
If a character ends his turn in a space with a fireland token, he must lose 1 life.

The character is ending his turn on a space with a Fireland token.