Yes, Baby Lugia will evolve, but not in a certain level. Just like a Togepi, both Baby Lugia and Buneary will evolve through, uh.., love...
Also, the waters in north cave will go down by a certain time. I forgot the specific time, but you can go to serebii.net to check it out.
btw, I am sorry for the roar... :D I didn't do any changes in the attacks of the legendaries, except for both Baby and Shadow Lugias.
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You have such high leveled PKMNs... I defeated the 6th GYM and this is my party...
Staravia lvl 27
Wartortle lvl 27
Monferno lvl 27
Manectric lvl 28
Grovyle lvl 29
Baby Lugia lvl 30