Everyone seems to notice how unbalanced this game is and the horrible endgame. How about making the game totally linear where everything is set before the game starts. This will be very much like a Japanese RPG video game where they give you a very limited amount of freedom in decision making. Instead of random dungeons, it will be set, monsters and treasures and the items you can buy would be limited to how far you have progresses in the "storyline" so you cannot be overpowered by finding uber treasure or buying it.
It would be completely Co-op or single player controlling multiple heros. Monster behavior would be set to some sort of flowchart or a very simplified AI. So no overlord is required.
Heh. My thought is that if you want to play a game like the one you've outlined, I'd suggest just buying a computer game But, honestly, I don't think the game as-is is terribly unbalanced at all, except for a few specific things that can be houseruled.