Its in the northern most region of that map, a little farther up where Troian(sp?) is. As for what to equip... well there is a trick. The Dark Elf has cast a spell that magnetizes metal and will paralyze anyone with any kind of metal equipment. Yang is fine as long as he wears a Ruby Ring, Tellah is also good. Cid should keep his Wooden Hammer and equip leather/cloth goods. Cecil should also switch to cloth/leather goods and he will need to equip the elemental shard weapons you purchase at the Troian(sp?) city.

In the dungeon, have Tellah use the elemental spells you can cast from the rod weapons, while Cecil becomes your dedicated healer (his weapons are useless) Cid should use Analyze so you can make Tellah more useful and Yang will be your dedicated fighter. This dungeon is a pain in the ass...