This is the machine you must fight in order to find Katara. Dodge the fire bending. Try running left to right, then right to left. Continue this until you see a flashing light near it, then attack it. Hit it with Aang. You may use a Chi attack but just a plain attack should work just as well, however it takes time. You will have Saka (Katara's brother) fighting with you to do double damage. Once it has around a quarter of its HP gone, the machine will start throwing fire around. Keep a safe distance from this attack. It causes no real threat to your or your partner as long as you stay as far away as possible.