I finally found the exotic weapons and armor. Now I am wondering if I should use the exotic weapons exclusively. Are they universally better than all the purchasable weapons, or are they only for use against the monster Exodus? In particular, I am very fond of the +4 sword carried by my Paladin, and don't want to swap it out unless the exotic weapon is confirmed to be superior against all monsters.

Exotic weapons are best in all ways except that they aren't ranged.

The Exotic weapons are indeed the best weapons in the game, better than anything you can buy, and are the only weapons capable of dealing damage to anything in Exodus' lair. They're effective against all enemies, and I immediately equip them as soon as I get them, unless I want the flexibility of ranged weapons, in which case I stick with the best bow I can get my hands on until it's time for the endgame.

Is it safe to assume, then, that Exotic Armor is also the best armor?

Exotic Armor is the best armor, and it actually affects class balance by favoring classes that otherwise have limited armor selection (like Lark).

I actually disagree about using Exotic Weapons all the time; ranged combat is too important in the game, so I always use ranged weapons for classes that can use them, except in the final dungeon of course.

By the way, because of the rules about needing exotic equipment in Exodus's Castle, the best endgame party probably consists entirely of Wizards and Druids, all Fuzzies (for the 99 DEX).