Infinite Undiscovery

If i remember correctly Lauan wood can be found by the forest level of SG, the one after the checkpoint, the trolls drop them quite often, but to answer your question your current level is okay but try to spam memoires of mercenary for more HP and you'll be able to face Ethereal Queen 1 on 1 at 175

I just beat the Ethereal Queen no more than 15 minutes ago with a party of:
Capell (lvl178) Balmung, Hydra Armor, Saruleus Helmet, Feet of Saruleus, Buffalo Wristband, and Karathos Necklace
Balbagan (lvl165) Mjolnir, Hydra Armor, Karathos Helmet, Crystallite Greaves, Buffalo Wristband x2 (makes his ATK 7330!)
Komachi(lvl166) Nighthawk, Sabris Garb, Avifir Headdress, Pheonix Feather Boots, Eternal Rose x2
Eugene(lvl162)Caduceus, Avifir Garb, Mage Hat, Blessed Mules, Magic Ampilo, Feeble Wristband

Balmung sword you get from beating the shadow version of a certain character in SG. You can create a Karathos Necklace from the Solar Necklace you got earlier in the game. If you go to the second to last floor in SG, you can get a Dullahan from the lizard warriors and use that to craft the Mjolnir for Balbagan, his ultimate weapon.
Nighthawk, you should already have from having beaten Gabriel Celeste. The Eternal Rose can be made by Kristofer in Kolton. He is in a building in the Southeast corner of the map. You have to connect with him in the city in order to create things with him since you can't put him in your party. It's the best way to make stuff really, because when you connect, they follow you anywhere. So, you can connect, then bring them back with you to the save point. Save, then try making the items. If you have a high chance of failing, and are afraid of losing the items needed, you just load the save you made from before you created the item. The Caduceus is a must for Eugene users. It regenerates his MP and HP. It can be crafted by Edward back in Kolton. He is standing at the statue where you faught the first Vermiform close to the ship in the south exit to town. As I said, this is the best way of crafting. Connect with him and take him back to the save point.

Also, if you don't have internet access on your Xbox, get it. You can download two vouchers for the game A and B, for free. You won't have to pay for Xboxlive or anything. Just get online, download them, and all the shops will have everything from junk to Atlantis metal, and crappy cloths all the way up to Empyrean Cloth. This will help with your item creation.

Have fun!