This is how I did it:
One character has materia equips as following -
w-summon, magic plus (mastered), knights of round (linked with) HP absorb, Counter (the support materia, not the purple one - mastered and linked with) Mime - (I also had Knights of round linked with MP Turbo that was mastered, but that is pointless with masterd magic plus, wich should be enough to do 9999 at each hit). Opt for HP plus as well.
The other two characters has the following setup:
counter (linked with) mime, magic plus... that's all.
When the fight starts use w-summon with Knights of round twice. Then mime for all the other actions.
Poor emerald got to shot one character as the first move and then stomp once only to get countered with 6 knights of round resulting in a swift death... he had no chance to use the Airetam Storm. Had the wonderful 3xSpeed feature acivated at all time, fight ended with about 8min left on the timer, did not bother with "underwater materia".
(Same strat was successfuly used on Ruby, but it's risky since he counters with Ultima. You could use knights of round and Hades in a w-summon combo - but that is obviously alot slower. Be sure to kill of to of your crew before engaging a fight with him, have the lone survivor starting out with Phoenix to revive everyone and then initiate w-summon 2xKOR or KOR+Hades, and then mime all other turns - I also had Phoenix linked with Final Attack for that one but it was not needed)
Grinding should be done in the norther crater in the area with the water. You'll be looking for magic pots that you need to use the item Elixir on to be able to kill and Movers (orange balls in group of three). Theses enemies gives tons of AP - Use Apocalypse-sword with Cloud (found in Ancient Forrest, has 3 slots with tripple Materia growth) and Javelin for Cid (can't remember where it's found right now - but it has 5 slots and double growth)