If the flashback weren't there, the great, tense scenes where Sephiroth/Jenova taunts Cloud on the way to the Crater for the first time wouldn't make any sense. There's a lot they have to set up for the punchline to make sense.

I've always thought that the final twist with Tifa and Cloud in the Lifestream was the best part of the game. After that point, the story just seems to coast toward the ending to me.