dtgreene: No, special party members don't level up; if the special monster isn't useful, it's time to D)rop it from your party (or, in classic BT1, just summon/recruit another one).
The main advantage of them, the way I see it, is the fact that they can sometimes use spells or breath weapons for free, which can be quite handy. Unfortunately, this is usually not reliable, so planning your strategy around this can be quite difficult. The Red Dragon summoned by a certain Sorcerer spell, for example, breaths 1/2 or 1/3 of the time, depending on whether the version you're playing has a certain bug (1/2 without, 1/3 with). (Of course, it can be very nice if you manage to get a special party member that always does something good, like a certain BT2 monster that loves to cast Mangar's Mallet.)
A few other things to note:
* Special party members always target the first group of enemies; enemies outside the first group won't be attacked unless the monster uses something like Mangar's Mind Blade.
* Illusionary party members can be disbelieved. In BT1 and BT2, such illusions only appear as the result of casting certain Sorcerer spells. (You can disbelieve illusions that enemies cast; there are a couple Sorcerer spells that can help with this.) If a party member is disbelieved, the party slot will now be empty, and anything the illusion was holding will be lost.
* Monsters in BT1 and BT2 won't cast healing spells; some do in BT3, and the spells always target the whole party. (If a monster is hacked to cast a single target healing spell, I believe it always targets the first slot.)
* Sometimes monster party members can go hostile; this isn't an issue in BT1 (unless you deliberately attack them), but could be an issue in BT2.
Ok thank you, I guess I should just drop him then. He appears to be too low level for his spells to hit anything. Thanks for the info!