You can beat that level, I beat it in my first playthrough, in easy mode of course, but I have to admit I die once in that final dungeon, and I probably had the biggest luck in the world on the second try because if you go thru the wrong doors probably you have to confront more enemies. Those groups of 5 or 6 enemies with the rats are not a joke. I tank with the second char moving with jumps, and use the low blows to kill the rats, low blows have very long range, so that is the trick.
SPOILER
You get to the exit and then you have a fight with 3 apes and then you rescue the magician. But on the next quest the game just ends. And on this point you cannot make more fights, only those boring pterodactiles and the nights, and the rest of the team is just bugged... So game over.
Did you guys find some nasty deaths or something interesting in the game? I know there is a tentacle in a well, but I did not do the wells because you cannot then go up (kind of bug). There is a pic of those tentacles, but I dont know anymore.
By the way there is a way to have infinite life in the other AoB games using a program that edits the data file in HEX, its called HxD, and in a russian page someone posts the lines to modify, I dont know if in this game that works... Ill try it later...
Hope this can help