You guys have it all wrong.. Defeat Dark Elf's first Form and then when you destroy that Form, Equip yourself with very Weak Equipment, I would preffer "Clothes". Equip your Party Members with that Equipment.. You can obtain this Equipment at the nearby Village on the Island that you are at.. And so now, you will barely get hurt by the second Evil Form of Dark Elf and he should be easy.. Dont forget to use the Legend Sword for Cecil and dont forget to use Cure for Tellah!