I haven't played FF7 in ages, but have been tossing some ideas about the story around for awhile. This involves Cloud and Sephiroth in "Cloud's Past" in disc1, the flashback to Nibelheim at Kalm shortly after leaving Midgar.
What if the monster that Sephiroth released during this sequence was actually Cloud? It somewhat resembles Cloud, being a humanoid mako creature with spiky hair. Since Cloud was infused with mako, and we learn that he wasn't really there as he recalls, its possible he absorbed Zack's memories at that moment since Zack was nearby.
Sephiroth isn't really the main antagonist in the story, that role falls upon ShinRa and Hojo. Sephiroth guides the party through the storyline, periodically assisting the party by leaving summon material for them. So, Sephiroth released Cloud and then used him to accomplish his agenda. The response Cloud feels to Jenova in the canister at ShinRA HQ in disc1 mimics the response he gets looking at the creature in the canister during Cloud's Past.
I'm talking about the monster released from the canister at this part of the game:
http://i1.ytimg.com/vi/29euU5fNqk8/hqdefault.jpg