So basically, the only way Ness can win is basically for the Truth to eventually do something in some vague way?
First of all, while I haven't played Earthbound, I'm pretty sure that like in most RPGs, Status effects don't last for eternity.
Second of all, while I understand that the previously (and constantly) mentioned Fate Manipulation is quite formidable... How useful is it in such a scenario? Don't get me wrong, for a kind to be able to defeat a universe-destroying monster is pretty impressive, but it seems like the truth simply allowed him to do this it was his destinity to complete his quest.
Assuming that Ness is still aiming to defeat Gygas even here, I don't see why he should specifically win in this battle or kill Bugs to proceed. From what I know, if they lose in a rsndom encounter, Ness and his crue don't die there, nor are forced to fight the same random enemies that defeated them again.
What im trying to say is that from what I can understand, Ness' fate is to defeat Gygas, thus he won't die in this battle, yes, but it's not like it would allow him to win every possible fight against anyone he comes across, especially if Ness himself, who by the way, has very few hax, is fighting against an enemy that is humoungously more pwoerful than him, immortal, and loaded with more abilities than anything ever, who most importantly, has no affilation with Gygas nor is a threat to the universe in a similar way. Oh, and Ness's fate manipualtion doesn't seem to have any feats of bullshitting his way to victory in sucha ridicolous way to win a battle like this.
The only way I can see ness winning is if Bugs for some reason decided to let Ness go or to befriend him becuase of Fate hax, but then again, don't see what would stop Bugs from punching the poor boy to mars and wait a week to pass before Ness manages to get back on Earth.