I have done some of the things mentioned. I did use the Chocobo to cross the swamp, after getting everyone to level 20, and then I built up some more in the Junon area (which I'm still doing), and went back and fought the snake and got Beta. I found an interesting strategy that worked.

1. Equip [Red XII] with monster magic (I have decided he will be my blue mage).
2. Equipe [Red XIII] with Fire and link it to Elemental on his armor. That way he takes less damage from Fire attacks (Beta).
3. I had Cloud do damage (mostly Quake) and Tifa heal as Red XIII guarded and waited for him to kick Cloud out of the party, because he generally kicks out whoever is doing the most damage.
4. When he uses Beta, Red XIII, still had about 400~ HP, instantly cast Beta.
5. Win fight.

It took a few tries because I either a) poorly timed my actions or b) jerk-snake kicked out Red.

now I got Yuffie and am doing the optional mountain sidequest and trying to get everyone to level 25.

Everyone excpet Aeris is now at the Limit level 2, and Red XII also has his level 3 limit. Cloud has his Climhazzard. My Fire, Lightning, Ice spells are level 2. So is cover and choco/mog and my two all materias. One of my Restores is almost at level 2.

EDIT

Also, if anyone cares, I am blogging my progress under My First Day in the blog section.