Lugae transforms into the Lugaeborg, shredding off his fleshy exterior to reveal the gangly cyborg underneath. Which is kind of scary I guess, but he's still a joke of a fight.
He counters every attack with Sleeping Gas, but that almost always misses. Nonetheless, it's a good time to have Mars jump and Kabbage use Power attacks -- better now to hit extra-hard once than to hit normally twice.
He opens the fight with Poison Gas, which... causes poison status. Mars avoided the attack by being airborne. I have two party members who can cast Esuna and plenty of Antidote items. This is not a major setback.
I don't remember if Lugaeborg is weak to anything, but if your enemy is a robot, try lightning. It's a Final Fantasy rule as well established as roasting undead with fire.
Laser is Lugaeborg's only scary attack, and even that's HP based. The lower his HP gets, the less damage Laser does -- so as the fight drags on, he gets less and less dangerous.
He was made much... well, perhaps not
harder, but certainly
trickier, in the DS version. There he had a move called Reverse Gas that made damaging effects heal and healing effects damage. He'd cast Cura at the party once they were Reversed, Reverse again, and nail them with Fira. He had a habit of Reversing between giving the command for your spells and those spells resolving, so to an extent the party works against themselves.
Dr. Lugae: ...taken all the Crystals to the surface. The dwares will be annihilated with my cannons! Victory is mine! Mwahahaha!
Kabbage: We've got to stop the cannons!
Mars: What are we waiting for? Let's go!
...are you telling me that the dwarves just sat there firing at the tower after we'd entered? Do they not understand that they can go home after the diversionary tactic is complete?
Incidentally, the Lugaeborg makes occasional cameos in later games.