Yes, the so-called peaceful ending involves convincing everyone in the debate. The Wiki tells exact details.
The Dimensional Parasite is an outsider, so Banishment weapons do extra damage.
Anything and everything you can do to max out attack power helps as the creature keeps growing (till level 99?).
Scrolls of Circle of Restoration, Potions of Lessor Restoration help a lot.
Summons won't do too much, but every bit counts, both for the damage and the distraction to keep your character alive.