I ended up needing to use the internet to find a town which sold better gear in Final Fantasy Legend III. I don't believe there were any in game clues as to the location of the town in my current time. (I have since heard reference in passing to the town in the future but no hints to its location yet.) It turned out to be underwater! (The dungeon containing Chaos is also underwater but at least there was an indication on the surface world that the dungeon existed!)
The town sold four new pieces of armour for my three non-monster characters. It sold a better weapon for my human. Most importantly it also sold the cure2 spell! I bought four copies of that and hoped it alone would be enough to turn the tide in the fight against Chaos. The extra armour didn't really help most of my characters but the cyborg scales his max health with gear so adding four new pieces moved him up out of danger from getting two-shotted.
With my new gear and spells I headed back to the dungeon, quickly made my way to Chaos, and ruined him. Two of my characters had no relevant way to deal damage to him and a third was my best healer but it didn't really matter as I essentially was able to go infinite on him with the improved healing. I would eventually have run out of mana but my human was going to win the fight in 20 attacks so I didn't need to go truly infinite, just long. It really helped that my monster had an ability that did 0 damage but actually lowered his agility. This let me guarantee my healers would act first each round which in turn meant I didn't have to worry about being gibbed. I did eventually lose a character when he got a crit with one of his single target attacks (and therefore hit for more than my max health) but it wasn't the character doing damage so it didn't really matter.
On the way out of the dungeon after beating him I finally got a second part to drop and was able to transform my cyborg into a full robot. It then turned out I had enough money to completely max his health and attack stats and bring his agility and defense to very high levels. (Certainly higher than any of my other characters.) I haven't gotten into a fight since doing that but if it's as good as it seems the game had better end soon since I'm now maxxed out in power on that character. I don't want to get into a situation like I did in The Final Fantasy Legend where I have nothing to gain by fighting the random encounters!