Sooo.. do you basically sacrifice a few dozen playthroughs to get the items levelled up that much (carry it with you for a bunch of levels, then send it back, then repeat), or what?

Well, just surviving to the end helps. There are a few ways to raise equipment.

On each run, you can pay for up to three weapon upgrades (1000 gitan each) from the blacksmiths: one in Bamboo Village, one in Mountaintop Town, and one you might find wandering in the mines and caverns between MT and Cryptic Rock Valley. Each upgrade is normally +1 but has a chance of being +3 (and the blacksmith will be quite pleased with himself when it is).

Then there are air bless scrolls, for swords, and earth bless scrolls, for shields. Each of these raises the equipped item by +1 or +3, and removes any curses on it if needed. (Nice side effect, and handy when you get nailed by a curse girl|sis|mom|gran, because those curses also seal the weapon's special abilities.) These scrolls cost 800 gitan apiece, so they're a relative bargain. You can often find about four per trip just in the dungeon if you're going to Cryptic Rock Valley or beyond.

You can revisit the shop in Bamboo Town often if you want to spend some time going back and forth between the town and DL4, grinding pickpockets and bowboys and then seeing what the shop's new stock is. If you really want to grind, just keep walking back and forth between Mountaintop Town and Canyon Hamlet, but that's really not my style. (Bouncing back and forth between levels 8 & 9 with an indestructible pickaxe or a weapon into which I've melded one is, though. Easiest way to get cash for the jar shop.)

Finally, the melding jar combines equipment bonuses, not just special abilities. So a +2 bronzeward, a +2 walrus shield and a +3 hide shield become a +7 bronzeward that protects you from thieves and reduces hunger.

But the true secret is: perform rescues. They're far better than storehouse jars. :) No, you don't get to use the town smiths, or shop for scrolls, but you can still find the blacksmith in the Old Mine, and if you're rescuing someone between levels 14 and 40 your chance of finding at least one shop in the dungeons is pretty good. (They can appear in any of the "indoor" levels.)

You don't get to keep any of the money you make on rescues, but you do get to keep all the items you find, so pick up that Golden Blade and the Drain Buster, even if you have to pay for them.

Grab and read all the Earth|Air bless scrolls you can while saving that hapless wanderer. Loot everything in the monster house before waking him up. In one dungeon, I found a four-slot melding jar and I was only rescuing someone on level 9.

When you get back to town, you'll have no money, but you will have plenty of good gear to put in the warehouse or carry to Mountaintop Town for melding. I use the MT warehouse pretty heavily.

Another fun trick: At the jar shop in Mountaintop Town, you can get paid for random items, if you put them into Jars of Holding within the shop. So drop that golden shield into a jar, swap a Jar of Change full of trinkets for a Melding Jar, and you should walk out with a bargain.

Pekeji will reappear somewhere else later -- the game doesn't remember where characters leave your party.

My recommendation for the post-game dungeons where you can't take any equipment in?  You *can* take in your stats and allies.  Kick your levels, strength, and HP up a good bit before going in and things will hurt a lot less.