Can you cast sanctuary on them pre combat?
Sanctuary makes it so that the person under the effect can't be attacked. Optimally, your duergar allies should be soaking the damage.
If you've got any other fragile party members, they might be able to make themselves invisible (Wyll), or drink a potion.
Flaming sphere also draws massive aggro and is resistant to arrows. A druid can cast it three times for a total of 150hp, which really feels more like 300 hp usually. It's probably a waste of spell slots for most other classes, but in situations like these, it's good. Can also be cast pre combat. Cast while your Tav is taking with another character on the very last dialogue choice. It can move and attack, but it's really about the aggro magnet aspect.
Shadowheart's tadpole power is also a literal life saver if you have it. Though, inkblot also should save you from ranged attacks. Even if the enemy gets their turn before you, that won't be a problem. Wizard has reflective shell. Between sanctuary, reflective shell, survival instinct and inkblot, ilithid powers are rather good here. I don't think you do. But, just an example for strategy. They can all be cast pre combat when the paladin is talking (who must cast before entering conversation).
You can both protect one character from anything and negate ranged enemy attacks. At that point, Gale and the Paladin can go in for the kill on Nere, with some third party member as backup if Haste didn't help enough. The fourth can return to the inkblot at the end of their turn and remain protected. You can retreat there in general once Nere is gone, though I'm not sure if you have the ranged options for that. Moon Druid and oath of the ancients paladin can moon beam and obliterate archers in safety, for example. Moonbeam always lands, so it's immune to disadvantage to hit chance.
That is interesting. What Duergar allies? When I freed Nere the first time, all Duergar (even the traitors) and from round 2 on all the Gnomes (to whom I promised to free them) turned hostile, and that mainly was the reason I lost the fight. Maybe I hit one hiding Gnome with a fireball? But why did the two Duergar who wanted Nere dead attack me? In the end I had all killed except Nere (about 10 hp left) and two Gnomes before they threw my last char into the lava. Damned.
Second try I killed the Duergar first, no problem then, but cheesing fights from out of dialog tastes bad. I spared the Grymforge up to patch 9, I'm a bit disappointed generally, but the Nere/Duergar fight was epic. I wonder how it will go when I'm there with my next char/class.

To Lae'zel: for me a +1 to AC does not make that much. In my opinion hit chances are generally too high in the game and shields too weak. It feels worse to be more defensive, it's more important to deal damage. And Lae'zel usually does not get downed very often in my campaigns because we end fights fast. I think the big weapon afinity fits her well. So I would not mind if we got the possibility to change lvl 1 decisions on companions, but it's not very high on my order of demands.