i dunno if you saw edgar and sabin's past or no, but if you didn't, once you're in figaro castle and sabin comes out and takes off saying "this place hasn't changed", too see their past, have the remaining party members go sleep in the downstairs room. sabin will be in the throne room and then the past will show.

and, it's a good thing you didn't get shadow. he takes off after you find terra, OR he will run after a random battle.

and yes, it's VERY wise to be on your guard. there are very hard enemies in Zozo, such as the BellyDancer that casts Fire2 all the time, and another one that looks like a giant. avoid fighting these two, especially the giant! when you kill the giant he will cast Magnitude8 or something and kill your party along with him!