This is the ending to Act 1.
It requires you to recruit all allies and retake castle Kaneda.
It's not too difficult in the way of enemies, they're all really basic. The best armour to use is probably Samurai armour you grab after going through the Clan Adachi tale sequence. Upgraded to at least level 3.
I'd have your sword upto at least level 4, if you can get it to level 5, go for it, the enemies are super spongey at 4, so 5 would make it a cake walk.
I'd recommend this as the duel towards the end can be quite a pain, especially on higher difficulties. Leveling up 'stone stance' and 'Wind Stance' helps a tremendous amount also.