Be careful with slapping the elite template on single creatures, particularly at lower levels. Fights can be very swingy starting out with low HP pools relative to damage output. For a single creature higher level encounter, I’d recommend adding a couple of low level adds as it’ll make the fight a challenge and more dynamic. For fights that already have several monsters, making one of them elite can work as a sort of squad leader. Or you can try and replace one or two creatures with another that’s a level higher. The XP budgeting and encounter builder rules are pretty spot on I find.

These are some pretty goofy characters lol. Honestly some of them are to the point where I personally would veto some of the players choices because they are bleeding into a style of fantasy that I don't like to include in my homebrew, but I'm not gonna yuck your yum. I know lots of groups enjoy really zany fantasy. I really like that you tied some of the characters into the town by making them residents of Otari.

As for how to deal with such a large group, I think it will be a bit trickier than just ticking Elite on some of the monsters. I run for a group of 5 players and I usually find some way to level up the encounters. Sometimes this is just making the one monster in the room an Elite, sometimes it's adding more enemies (this one works pretty well in any room with exactly 4 enemies by the book, since you can assume the designers intended for even numbers on both sides). Sometimes you can do a combination of both.

There was a fight on the fourth floor where I Elite'd two enemies and also added two enemies, and it still didn't pose much of a threat to the PCs. More PCs add exponentially more power because more teamwork and action economy become available.

The tricky thing with adding more enemies though is that this adventure suffers the same problem that I've heard a lot of published Paizo adventures have, which is that the encounters are often extremely claustrophobic. Adding more enemies will really exacerbate that, since suddenly any sort of maneuvering will be tricky with 12 characters trying to elbow their way through a 20 square room (lots of the rooms in the early floors are only like 20-25 squares).

The other option of course is to simply play everything by the book. This will mean that the PCs will earn less XP in the beginning, but fights will be easier. Then, as things ramp up in difficulty, their XP scaling will begin to catch up naturally. Foundry supports this quite well, as the encounter tracker will tell you how much XP a fight is worth based on the enemies and allies included in it. I use this particular method when my players return to a lower level area to mop up something they missed. But I could actually see it working well across-the-board for a big party since the combats are naturally going to take longer since there are more people. You don't necessarily want encounter balance right out the gate since balanced encounters are naturally slower to play out. It might be better if the heroes feel like badasses squashing bugs at the beginning and then once they start delving deeper the danger ramps up naturally. I suspect that's something you are shooting for anyway since you're starting them at level 2.

I would avoid using the Elite template. AV is often considered somewhat overtuned for its level, with an abundance of 1- or 2-creature boss fights and optional extra challenging fights sprinkled theoughout it, and particularly frustrating encounters for magic users making up the first half or more of the module.

Eliting those solo boss fights in particular is going to risk downing players quickly. The extra +2 to hit and crit at low levels is incredibly significant, even if they are starting at Level 2. If they're not able to skirmish with the bosses, necause the party's so large and the rooms are so small, and they're not able to effectively waste the enemies' actions because they're such low level, their options are going to be limited to face tanking creatures that can one-hit them.

What you might want to do, instead, is increase the room sizes (assuming you're not playing on a flip-mat), apply a Weak template, and then clone the enemy.

A PL+2 enemy (for example) is worth 80 XP of the encounter budget, while an elite version becomes PL+3 and worth 120 XP (which is a moderate encounter for a party of 6, but it will not remain a party of 6 for very long). Meanwhile, a weak version becomes PL+1, is worth 60 XP of the encounter budget, and cloning it makes it 120 XP encounter but with a signidicantly lowered chance of anyone being squished without even getting a turn.