I've just tested, and confirmed, that Karchy's method works as he described in his first post. It has nothing to do with divided Necros, as it seems. It works the same way as Bombshell (the mob that drops the Yagu Darkblade). You really only need three zones on the map for this to work: The platforms with Waystone XIV, the Leo Gate Switch, and the Leo Gate.
Here's exactly what I did:
Starting from Waystone XIV, I went up to the platform with the Leo Gate Switch (LGS), and down to the platform with the Leo Gate (LG), chaining necrofiends until I hit around 221-ish. During this time I killed every last Necrofiend in the LGS platform, to the point that they would no longer respawn. I kept going down to the XIV waystone to reset the LG platform to get more mobs to kill, and after a 221-chain the Larvae Eater spawned, so i stopped short of 255. It's worth noting, however, that I have chained 255 previously to get the Larvae Eater to spawn for the first time.
After killing the Larvae Eater (no drop this time), I ran through LGS to LG to reset the Waystone platform. I then returned to the Waystone platform, and checked for LE. Since he wasn't there, I walked up to the Waystone/LGS zone border, and zoned back and forth for around 5-10 minutes by holding down on the analog stick with a rubber band, while I was browsing these forums.
Once 5-10 minutes had gone by, I stopped zoning, and checked the Waystone again, and lo and behold, there was a Larvae Eater. Kill (again, no drop), and run back to LG to reset the zone.
Lather, Rinse, Repeat. I just killed 5 LE's in about half an hour. Unfortunately, so far none of them have dropped anything, but I'm going to keep at it. Keep in mind that you don't have to kill anything in between LE kills, so you are chaining LE, which means eventually you will start going up in chain levels and will reach the increased drop % that people have suggested the bomb method yields.
Now, here's why it works:
Much like the Bombshell, there's a small chance that the LE will spawn every time you enter the Waystone platform. Once he does spawn, he will stay there until you reset the zone or kill him. Thus, if you just keep zoning back and forth between the two platforms (Waystone XIV and LGS), he will eventually show up. Once you've killed him, you have to reset the zone before he'll spawn again.
The trick that makes this different from the Bombshell is that LE does not seem to have a % chance to spawn UNTIL after you've chained a bunch of Necrofiends. However, once you've completed this task, he does have a small % chance to spawn each time.
Thus, you start your Necro chain and continue it until LE spawns. After you kill the first one, you run through LGS to the LG platform to reset the Waystone platform, and return to it. Then you zone between LGS and the Waystone platform until he spawns. Since at no point do you ever go two zones away from LGS, you never reset it, and thus don't have to deal with Necros anymore, allowing you to chain LE's with impunity.
Since you don't need to kill another chain of Necros to get this to work, but it won't work after using a save crystal, I presume this means that you need to make a large chain to get the first LE spawn after using a save crystal. It may also be that waystones interrupt this method the same way save crystals do.
This could explain why some of the people trying to replicate Karchy's method were failing. Maybe some had already completed a 255 chain earlier, but had saved or used a waystone or save crystal since then and thus re-set the flag that enables LE to spawn. They came back to try Karchy's method without creating a new chain to get the first LE spawn, and thus weren't able to spawn it with the zoning trick.
There is at least one other thing that could be important here: clearing the LGS zone (and I mean really clear -- you should be able to make several laps around the place from end to end without getting anything to spawn). There's nothing in my experience to indicate whether it's the chain level of Necros or the actual clearing of the LGS platform that triggers the first LE spawn. It could very well be that the trigger is clearing this platform, which would explain why some people get their first spawns after 20-30 Necros (they just clear LGS) and some take 200-250 (they kill a few in LGS and mostly clear LG over and over).
I'll be glad to answer any questions people can come up with, in the hopes that someone else can duplicate this and confirm what Karchy and I have discovered.
Also, some tips:
1) I check the zone every time I reset it, to make sure there are no reapers. I've tried fighting LE a few times with 3-4 Reapers around, and let me tell you, it makes it a bit of a pain (even at lvl 85). Having to deal with LE's Invert is annoying enough, but having a few reapers throwing KO and Annul around on your party members is downright ugly. Luckily, if you get reapers, you can just run back to LG and reset the zone again.
2) The number of times you need to zone really is random. Sometimes it takes 10 minutes of zoning, other times it's 5 minutes. Once the LE even appeared the very first time I reset the zone, during my reaper check. If he doesn't appear after 10 or 15 minutes though, chances are you've done something wrong.
3) He doesn't always drop anything. He didn't start dropping loot for me until the 6th kill, and still hasn't dropped a Danjuro for me (i'm at #8 right now). So far I have 2 Demon Eyeballs and an Arcana to show for my work.