Could someone help explain something?

I'm playing through FF7 for the second time and I'm trying to fully understand the story as best as I can so I can get the most from the game.
So far there is one bit I'm not quite sure I understand. When Sephiroth and Cloud go to fix the reactor at Nibel Reactor in Cloud's story at Kalm there is one bit of text that goes..
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Sephiroth
"Normal members of SOLDIER are humans that have been showered
with Mako."
"You're different from the others, but still human."
"But what are they? They've been exposed to a high degree of
Mako, far more than you."
(Cloud gets to his feet.)
Cloud
"...Is this some kind of monster?"
Sephiroth
"Exactly. And it's Hojo if Shinra that produced these monsters."
"Mutated living organisms produced by Mako energy. That's what
these monsters really are."
Cloud
"Normal members of SOLDIER? You mean you're different?"
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How does Cloud conclude Sephiroth was talking about himself not being a normal member of soldier when, to me atleast, if you read the first part again,
--------------------------
Sephiroth
"Normal members of SOLDIER are humans that have been showered
with Mako."
"You're different from the others, but still human."
"But what are they? They've been exposed to a high degree of
Mako, far more than you."
---------------------------
It sounds as if Sephiroth is saying Cloud is different to normal members of Soldier, not that he himself is different.
I hope I've made what I'm trying to ask clear.
Oh and one final small question, what is the story behind the monsters being produced in the pods at the Nibel Reactor?
Thanks!

The "you're" refers to first class soldiers in general. He could said "we're" different but still human and it would have meant the same thing.

Exactly. Also, when you think about Sephiroths power and fighting ability, it makes sense that Cloud would conclude Sephiroth wasn't normal.

As for the story behind the monsters; they're probably just one of Hojo's experiments.

yeah, it's a little confusing but i think viv22 and mjn seifer hit it on the head. when he says normal members of soldier he's referring to cloud, and i think cloud takes that as a little hint that Sephiroth isn't normal.

As far as the pod things, throughout the game it becomes obvious hojo's just a sick :skull::skull::skull::skull::skull: who loves doing things to real organisms.