Just because Lloyd can kill your characters in dragoon mode doesn't mean you can't use them. Just equip one character with the Talisman accessory. This protects against Lloyd's attack. You can use 3 talismans if you have them. If not, just make sure you use Dragoon mode only when you have 100 SP,or in other words, one turn as a dragoon. That way, you hit and run, avoiding his attack