Here goes the next update:

Level 1 Challenge:

This one was not as bad as I thought it would be honestly.

I picked up everything on the way to the frozen moogle and saved. Although on the way here I ran into few battles and noticed that I have really hard time fleeing by L1+R1, so I usually was forced to use "Flee" and lost a few gils on the way there.

For the boss battle I had hard time thinking out strategy as I wasn't able to survive. I had to retry this battle like 6 times. After some twinking I finally found out that to sucessfully survive and steal mythril dagger at the same time, I have to put Zidane in front, kill the wizard, steal the dagger all before hitting the trance and then attack sealion once normally and finally finish him off with tidal flame.

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Excalibur 2 Challenge:

Now this one was pure hell with all the screens, items to get, encounter rate etc.

After my level 1 playthrough I decided which chest to get and which aren't worth it. I decided I should pick up Tent, Ether and Mage Masher. I really wanted Leather wrist too but decided it's not worth my time. I also decided that I don't want a single encounter on my way to the moogle. For the first time I used the changing screen trick to reset encounter rate and after messing up and being simply unlucky, I finally managed to pull through after about 30 tries.

Now for the boss battle, I used the same strategy I came up on level 1 challenge, while also stealing extra ether for more money. Since Zidane is level 2 atm, it was easier. The area after the boss can theoretically be done without any encounter, but that is extremely unlikely and not really worth aiming for. One encounter is fine as is. And I managed to get only one encounter on my very first try that I managed to kill the boss. Lucky!

Gamefaqs perfect FF9 file with skipping FMVs by Atomos199 time: 01:02:14
Youtube FF9 perfect game without skipping FMVs by rlouisw: estimated 01:11:39
My time:
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Seriously I am not sure how the hell do they come up with these times. Well they are much better than me and they both probably tried much harder for these times as well. Still I don't think I am too far off from rlouisw time so far so I think it's fine.

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This area really gave me troubles on both challenges, I am happy I finally managed to get it over with. Now I am off to the most plain place in the game (at least in my opinion). The village of Dali.