I never understood the consistency in which characters in the matrix (specifically Neo and Smith at the end) were able to demolish things with reckless abandon, without hurting themselves, but could hurt each other.

Specifically, if Smith threw Neo into a crater, is that not what he can do with a punch? Yet they get punched all the time and don't feel as much pain.

It seems a tad dubious to me.

All the same, we've never seen even one person die to a sword in the movie (which is odd considering we see people die to gunfire incessantly). This makes for very questionable grounds if I were to say Sephiroth would win, which is my bet.