In NES, Chaos had 2000 HP. He had 4000 HP in WSC and PSX... and now he has 20,000 HP? However, as far as I've heard, FF1 DoS is a lot easier than the other FF1 versions, so you should be able to beat Chaos. I always beat him on levels 30-35 in the other versions, and I've seen people beat him on level ~20 in NES.

For your strategy, give the Knight your strongest weapon, Excalibur, Masamune or some other new weapon that's in the game. Cast Haste on him, and have someone cas Temper on him, and if you have an accessory that lets Knight cast Saber on himself, use it too. If you have a White Wizard, have her use A-Death and Wall on everyone. Temper and Saber stack up as far as I know, so in for a few turns, you should deal loads of damage. Then go and beat up Chaos. Have the others attack too. My Knight did 3500+ damage with his every attack after 4 Tempers in PSX. I know you have more MP for spells in DoS (Ninja only has MP for 4 Temper spells in PSX) so you can boost up the Knight's attack power even more there. In PSX, 3500+ damage is practically an instant kill move if you've had someone attack Chaos before. However, in DoS... well, it takes a while more. But if you boost up your Knight until he does 9999 damage, you should have no problem.

If everything else fails, level up. The levels seem to go up a lot faster in DoS than in other versions.