LS had some great items to give, but honestly, I think it was put in poorly for extra gameplay. I did not have Robo in my team, so I did not catch that conversation, but if what you put down is accurate from the game, it makes the LS even more crappier story wise. Why?
They had enough time to build a gigantic tower as a shrine to the heroes with huge statues that nobody could lift (so said Magus or Glenn in my party), but, as like someone said earlier, there was absolutely no development at all in the town. I think it was just the developers being lazy, to tell you the truth. However, in 600 A.D., the southern area changes as well as, like the lizard said in B.C., they will block off the area in the cave so no monsters could attack the villagers, and that did happen. The mountain is still the same, but again, that must had been a pretty awesome vine as well as the others that managed to make it through all of those years that did not need to be replaced. When you first enter the A.D. LS, the chief lizard tells the villagers that these are the walking talking apes among our legends, so I will assume time passes regularly, but there is absolutely no way to prove it, which leads to just more pointless speculations.
I am about to start my third time through the game, so I will see if I can find any more hints, if there are any.