From what I understood - and it's been a while so I could absolutely be wrong - the huge materia was not being used as an explosive device but as a device to power the rocket itself. Once in space, the rocket had no additional need for power as it was already traveling at speed and in the right direction. The materia was being used for lift-off.

This is backed up by the massive explosion when the rocket hits the meteor, which means there was some kind of explosive device within the rocket powerful enough to obliterate it to pieces. However, the meteor itself being magical meant that it could regather it's pieces and thus carry on it's course.

If people had some theory that the huge materia itself was an explosive device, then surely the train crashing into Corel would have killed everyone in the area?