A lot of stuf! Responses inline:
I assume this is Eder, not Aloth. I would say Gorecci St is the hardest fight in the game with just three. You'd have to split the encounter in two. Even with two hirelings, I still split the fight, and a few unlucky hits from the crossbow can be a nightmare. Gorecci is pretty well-known to be brutal though, so no shame in stealthing past it.
This is roughly my experience. I don't use mods in general, so by default there's no easy AI trigger on when to hit ascendant. When I tried an ascendant out (it was an ascendant/priest for salvation of time shenanigans) it was alright, but it definitely meant me hyperfocusing on my ascendant at the expense of everyone else (even with aggressive pausing) just so I could make sure I could squeeze everything out of ascencion.
Ciphers just have this larger action economy issue, simply because they *have* to attack to generate focus, and that takes time. Ancestor's Memory is very good in the right combo builds, but can be a waste if all you do is get back a few mediocre spells or one high-level martial ability on a party member. Reaping Knives is much better - the opportunity cost is really not so bad because on one of your front-line characters you get back the focus you spent on it pretty quickly; on two party members (helps to have a high intellect) you can easily keep your focus topped up. These days I really like the psion, even single-classed, because they are basically immune to action economy issues - they generate focus even when using cipher powers! It won't be as strong as an idealized cipher attacking enemies in melee, but it is definitely much more consistent, and can do things that a normal cipher can't (at mid to high level you can endlessly spam their tier 1 interrupt power or something like mental binding, which a normal cipher can't do because they eventually have to stop and attack for a while). A beguiler should be able to do some setup to generate a ton of focus in big fights though.
fun fact: AI scripts can see through any hidden health. If you set up use of consumables/second wind or party member healing on health thresholds, they'll still be activated even though you as a human being cannot see your character's health.
xoti makes for a highly cromulent monk. Not always the most ideal monk subclass, but monks in general are consistently good super stars. a single-class monk xoti pretty much carried my last party (whispers of the wind + ajumaat's stalking cloak + dance with death + +3 wounds upon a kill; even hauane o whe the megaboss goes down pretty fast).
you're playing potd with upscaling on, and that's going to be par for the course for the early to mid game. the +2 PEN and bonus accuracy that enemies get (for more crits at 1.5x PEN), coupled with consistent extra boosts as they scale up means that there's an arms race between your armor and their PEN that you basically cannot win for a while. Heavy armor is rare early on, and magical heavy armor even rarer. So what heavy armor you do find will likely not give you much damage reduction, if any (the fact that heavy armor has weaknesses as bad as medium armor doesn't help), all while giving you huge recovery time. Prepare to quaff a lot of potions and heal a lot, and things that give you AR (hardy, zealous endurance, ironskin potions, spirit shield potions) and things that reduce the enemy PEN (dazed mostly) are very important. Eventually things get better with more talents such that even medium armor (properly enchanted/leveled) is good, and heavy armor makes you tough as nails. But it takes a while to get there and you have to be diligent about upgrading your gear because however much a spike in defense some exceptional heavy armor might be in mid-game, in late game it might as well be unenchanted medium armor for what it does for you again high-level upscaled enemies.
shields are also extremely important. medium shield and higher can do an awful lot for your survivability especially early on - the medium shield modal is a straight 30% weapon resist, which isn't nerfed by difficulty, which can make it pretty invaluable for surviving hard fights involving weapons. the bonus deflection (with weapon and shield style) can be huuge.
i manually use it coupled with shared flames to keep a bit of uptime on the shared flames buff.
make sure you properly specify in the AI script dialog box how to determine what to use. A simple thing to do is to put the paladin AI script first, and then the fighter, and then make sure you select "by list order", this will basically guarantee you'll use from the paladin script so long as there is a valid paladin action to do, only falling back on the fighter if there's nothing to do from the paladin script. If you have both of them in the same script, make sure the FoD trigger is higher up on the ocnditionals than the knock down trigger.
pallegina works better not as a front-line tank but as a sort of mid-line short stop. That way she has flexibility to move in and out of healing range because lay on hands is such a limited range ability. pallegina also has miserable dexterity (a flat 10 iirc) so she's going to be really slow. Using medium armor and armored grace goes a long way to letting her be more responsive in fights; give her some rum/rymsjodda lager (+drunkard's regret optionally) or koiki fruit to help. Paladin and especially paladin/fighter are so inherently tough as nails that by middish game that by that point I just put Pallegina in light armor (on top of action speed-boosting food if I can swing it) and that erases most of my issues with her responsiveness.
make sure your other party members have potions and/or athletics, or else you may find yourself forced to make xoti a heal-monkey. One that thing that doesn't help is that obsidian NPCs don't get any reputation scaling, so xoti's holy radiance won't do as much healing as a mainchar or hireling priest's holy radiance (not as big a deal as in poe1, but just tossing it out there).
judging by what you're saying there are also some real action economy efficiency issues. litany/prayer of the body isn't great just for clearing status effects - pretty much only worth it to clear enfeebled on someone who is going to need healing, and litany to help someone put enemies around them into underpenetration. litany/prayer for the spirit is better all around, but typically you shouldn't be using it to wipe out confusion, and possibly not even charmed (the enemy AI is bad enough that a charmed party member may not even stay charmed for long, and it may not even do much).
how are you gearing eder? between constant recovery, a fighter's inherently higher deflection, superior deflection, armored grace + medium or heavy armor (properly enchanted), and the option to put on a shield and switch to e.g. defender stance (along with a perpetual -5 accuracy debuff to enemies if you have persistent distraction), and possible escape support (for +50 deflection), swashbuckler eder should be pretty tough mid-late game.