Iguanas can be found alone or with Giants. They are found on the overworld near Matoya's Cave, and with giants in the Earth Cave and Gurgu Volcano.
The only strategy I can give is to say that they're stronger than they look. Be prepared. Oh yeah, they are in the Dragon category, so the Dragon Sword (Wyrm Killer) works well against them in the WSC version. Not that you really need it. :)
I can't understand this. Iguanas are called Lizards in the Japanese version (and FF Origins). Why in the world would they change that? They're the same number of letters!! Anywho, this is one of the few things that come from real life. A lizard is a four-legged reptile with a long tail. Of course the picture (with six legs!) would suggest this isn't an ordinary lizard. :) Various lizards appear in every later FF and Mystic Quest. Iguanas are large tropical American lizards, and according to my dictionary, they're edible. o_O