ok well this is the stratergy i used on him
All Characters with Celestial Weapons - Nuff Said
Armours - I had Ribbon, Auto-Haste, BHPL (on all armours) and A combination of Auto-Protect, Auto-Shell and Auto Phoenix on the remaining free slot
Max Stats, Luck of about 130 and HP of 28,000-38,000
Quick Pockets, Quick Hit, Entrust, Blitz Ace and Attack Reels were important in this fight. All Aeons in Overdrive as well
About 80 Megalixirs to be safe as well
Ok my opening party were Tidus Wakka and Auron, I chose Auron due to his first strike ablity. To start with I cast Auto-life on Tidus, Quick Hits with Wakka and Tidus. Auron then gets another go before Penance, so switch him with Yuna and Summon the Magus sisters.
Then Attack with them, at this level they should be able to withstand one round of Penances attack, Just before he is about to attack and finish them, use Delta Overdrive, He will then Kill them off.
Next Attack Reels with Wakka (a perfect 12 hitter is really useful here), hopefully now you have destroyed one or both arms. So quick hit with Tidus ot the body, switch Yuna out and bring in any other char and entrust to Wakka.
Keep health up by quick pockets and Megalixirs. When an arm regenerates then use Blitz Ace and Two quick hits to finish it off, Keep entrusting to Tidus and Wakka and uing their overdrives (set the modes to things like comrade and stoic, so the gauges charge during battle). Keep switching in fresh characters and always use quick hits, you don't need to worry about MP as megalixirs (always use quick pockets) will bring them back up.
Keep hacking at the arms to keep at least one of them dead at all times. I like to use one member as a dedicated healer, attacking occasionally, one member to work on the arms all the time, and the final member to help with the arms and attack the body from time to time.
Eventually the first form will fall and the second form will arrive - this can be tricky as it removes MP as well as HP, but good old Megalixirs will take care of that -p
If you get to the situation where you can forsee Penance having an attack with both arms alive (and it will happen at some stage) Summon an Aeon to soak it up, as Judgement Day will be game over even wth auto life, as it will use Giga-Graviton straight after.
The aeons to use are those who have non-elemental overdrives (Anima, Yojimbo, Bahamut, Valefor) first as you can unload the overdrive, don't use elemental overdrives as they will be absorbed by Penance.
Keep up the tactic pretty much the same as for the first form and he will eventually fall. Conratulations after about an hour and a half you have beaten him -p
That is just my tactic for him, others may have different set ups and ideas, but I know this one works (well it did for me)