Agree with number 1. Ultimecia's Castle was a excellent place. I feel the Northern Cave could have lead to something of more narrative substance. The beginning of it being a cave is okay. But eventually you see the flood of life energy. At this point you should actually be entering a realm of life, energy and memories (similiar to what happened when Cloud and Tifa fell and Tifa helped Cloud curing from confabulation) and show how much trouble guys that are not Sephiroth have, resisting the amount of energy and memories and eventually end up getting Mako Poisoning/a broken mind. They somehow barely get through to the core of the planet and the "very root of the Lifestream" and find Sephiroth, the true problem. Similiar thing could have been cool for Ultimecia. They could have included more of time fusing. They already had it with the overlapping after fighting Adel and when they used the windows after fighting Ultimecia.

Counting the entire franchise, I would say Mako Reactor 0 + Above Midgar + Omega Weapon were pretty good for the finale. Though I would really not just count Above Midgar + Omega because the Reactor was the prelude to finding Hojo, who virtualized himself and Weiss and from that point really of of it is about to play a great role for the finale.