Sephiroth was potentially the first interesting villain in the series IMO, though I agree with Raistlin -- his background was generally underutilized and misused.

There was sort of a revenge story about what happens when science and corporate politics try to control lives. In addition, in some sense, Sephiroth was analogous to a founder of a religious cult whose belief in his own self-importance has drastic consequences. That's already far more interesting than the generic evil and/or insane megalomaniacs from I-VI.

Because the concept of the Sephiroth character was not that generic villain we usually get in fantasy games (even if his ends amounted to the same thing), he deserves some of the love he gets IMO.

Unfortunately, the penchant for the illogical plot twist that crops up in a lot of anime series, literature, and games that run too long confounds exactly what Sephiroth was all about and what he was trying to do -- plus we get a lot of the Jenovah-masquerading-as-Sephiroth garbage that throws away some of the quality development the character had.

Also unfortunately, a lot of the love Sephiroth gets is because of the "kewl factor": he has a cool sword, has cool hair, has a cool black coat.

His, IMO, is a case where he gets too much blind credit from fanboys who like him because he's kewl, and probably not enough credit from people looking for reasons to dismiss those fanboys.