We're gonna act like Terra was even remotely close to being at the height of her powers at the time of the Vargas duel?
We're gonna act like Terra didn't have a pretty clear case of PTSD at the time the first Phunbaba fight occurred and didn't single-handedly defeat him on the second go-round, becoming even more powerful afterwards?
We're gonna act like Kefka is even remotely sane and his perception of threats is even remotely credible?
We're gonna act like Terra isn't the one noted to have blown through fifty Imperial soldiers at a point long before she reached her peak combat prowess?
Not to mention Terra has access to better weapons than Sabin and can morph to double her damage and halve the amount of damage she'll take from Blitzes (except for Pummel and Suplex) so even if we're going to pretend magic isn't going to be an advantage, she's still no slouch in physical combat. Oh, and, as the OP mentions, she can fly. Which kind of puts a crimp in Sabin's hopes of suplexing her, unless the Vector Arena has a roof.
Anyway, here's a simple rundown of how the match would actually go:
* Terra strikes with Ultima Weapon
* Match ends