If you don't know where Stringy Pete is, Pete: 682, 1339 Treasure: 807, 1339 Those might be backwards. Anyway, get all your characters around Pete, do a quicksave. Enter TURN-BASED combat, or this won't work. Start attacking him, and use the disarm spell if you have it. As long as you remain in turn-based combat, his henchmen will never appear. When you kill him, stay in combat, run far away, then rest and heal. Save. Because you exited combat, his henchmen will have appeared. Tell your pals to wait where they are, then creep up and lure one of his henchmen at a time back to them, and pick them off one by one. This was accomplished using a level 32 melee char with Virgil and Magnus doing backup. The only item I ever used was a single heal-all, during the fight with Pete himself. Keep the sword, take the boat.
The other option if you are a mage is to take a bunch of +mana staves with you and disintegrate to your heart's content :wink:
Better yet, disarm them all in real time, and fight! Took me about 5 minutes of just sitting there watching the battle - I took on 3 skeleton minions while the rest of my team took on Stringy Pete and one minion. Picked up 3 scars in the battle, but hey, who cares! Those skeletons have about 90% damage resistance by the way.