It is
ABSOLUTELY worth beating these Demon Knights. Aside from standard party buffing spells, have your party summon in the 4 (not the max of 5) toughest monsters available and place them in a box around your party. You want to have each monster target its own demon knight, not all gang up on one. You must only summon 4, not the max of 5, because when you summon some poor animal or perhaps a wood nymph to trigger the battle, you don't want to exceed the max number of summoned monsters and accidently "delete" one of your summoned allies.
BTW ... For any of you who have ToB, did the statue in this room where you must place the animal sacrifice look vaguely familiar????
minor coded spoiler
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"The Forgotten One" from the Watchers Keep perhaps