The difficulty spike: how would you address this situation?

I had gotten Mog to do a pose after Banon's quote, but for some reason the game would soft-lock if Mog was in a party and there were team members not selected.  When I removed all the 'ready' poses from the start of the fight, this soft-lock vanished, so I'm guessing I hadn't set his actor up correct or a pointer was going to the wrong spot.  I did use some free event space to give him dialogue during the fight, though it's just "Kupo-po!".

This is the second byte in the event code. Subtract 80 from the second byte of the action queue, so if it is [0A 84], change it to [0A 04]. A value of 80 on the second byte indicates that the whole event cannot move on until that character's action is complete. However, if Mog is not on-screen, the action CAN'T complete.

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As far as the difficulty spike goes, it sounds like adding guest characters is one solution you're exploring.

Honestly though, if Edgar is too weak now, he'll be too weak later as well. Cover is a pretty lackluster ability, unless the player is set up as a damage sponge (high natural HP, high defense). To set Edgar up this way, you'd need to subtract points from his other stats, like his Magic Attack. The ONLY game I've ever seen that has made "Cover" worth it is Xenosaga Episode III, where Ziggy could double his own HP for the duration of the battle, then force enemies to lock onto him. This made glass cannons like Momo viable.

Other possibilities:
* Drop Sabin's "Fire Dance" to level 12. Most players will already be at Lvl.12 when this fight starts, and if they're not, the exp they learn from the battle will probably put them over the edge.
* If Gau learns Rages just by encountering enemies (I'm reading between the lines here), make one of the enemy's rages a healing ability.
* If Shadow ends up in your party, have Banon give him 2 of the scroll that causes "image" status.
* If I remember correctly, one of the enemies casts Ice. Change that to an enemy skill that is less powerful, or drop that enemy's Magic Attack. In my 3 scenarios hack, I had to drop Rizopas's MA since he is encountered at the beginning of the scenario and not at the end. In Divergent Paths, I had to majorly change TunnelArmr, since Runic is not there.
* Put in an event where talking to Banon mid-battle will heal your HP/MP.