How would you get out of this sticky situation?

I'm currently playing through multiplayer with a friend, and though only I've played it before, I let him be host as I wanted him to experience being the Bhaalspawn himself. We've just cleared out the Nashkel mines, and managed to get wiped out (save the main PC) in Tazok's camp.

Forgetting dropped loot doesn't stay on the floor indefinitely, I sent him back to the Friendly Arm to resurrect his fallen comrades, but on return to the camp our equipment had gone. And alas, due to his lack of experience he hadn't been using multiple save slots.

Somehow we've ended up with a reputation of 2, so we can't just saunter back into town to get companions or tool up. We've managed to buy some basic gear (the front-liners are wearing studded leather!) but it's obviously not good enough and we're getting our butts royally kicked, especially in ranged combat.

So, how would you go about continuing the game in a way that's not going to alienate a new player (like a restart or exploit), getting a little more gold and reputation and getting back on track?

Current party is CHARNAME (Thief), Me (Jester), Kagain, Neera and Viconia. We've tried to get Shar-Teel but just can't get through the basilisks. Bear in mind I'm playing with someone who isn't very experienced.