To my understanding the cursed shoes make you weak to everything, including healing, but you can't take damage from being healed so some kind of crazy stuff happens in the coding when you heal someone wearing the cursed shoes and they gain resistance to everything. There's also a hilarious glitch to make one of your characters into an immortal snowman. And one to gain priority on every action. And one to walk through fixed map encounters. And one to disembark from vehicles several tiles away from them and pop over walls into places you aren't supposed to be. This game has a lot of bugs.

There's really no reason to finish Theodore's Quest, as far as I know all it does is slightly change the ending, and I'm not even fully sure it does that. If you are strong enough to kill the Jewel Beast, you should be strong enough to finish the game; there isn't much of a difficulty spike beyond that point. The game has an odd fixation with glass cannon enemies for the most part, and the final two (Technically five, but really two) encounters follow that logic, so if you managed to take the Jewel Beast's attacks and kill it that quickly you should be completely fine, though Saruin does have a bit of a dirty trick up his sleeve if you happen to go the glass cannon route as well. And aren't a snowman.

Little bit of a nifty aside, if you do decide to give up that Obsidian Sword he totally DOES use it in the final fight and his stats are increased accordingly. He's also bugged when you do that and the easiest boss in the game. This is not the case in the remake however, and you can actually give him ALL of the destiny stones there, which is an absolutely hiiiiiiiiiiiiilarious for the two seconds it takes him to kill you.