I remember the final dungeon handing my ass to me many times. But is the difficulty really toned down on the PSP version? That's what I'm hearing.
It's not any easier than the GBA version. The main reason why it comes off as easier is that they lowered certain amounts of EXP to level up (as mentioned above - I don't know if it's as drastic for any other class other than Paladin) and auto-battle is wonderful.
In the original version of the game, two modes of the game were released .The PSX version is known as "hard" mode, while the original release in the west was "easy." I'm pretty sure the GBA version was based off of "easy" mode. The first half of "easy" mode is relatively easy, but it spikes in difficulty about halfway through to the point where if you don't pay attention you die.
Now that I think about it, that's pretty much how Hard mode is as well. Except Hard mode needs more grinding for the first 5-6 hours of the game.