On beating Sephiroth's second form:

What you need first of all is the manipulate materia, I forget where to get it, but you can find out somewhere online. You also want at least one character with enemy skill materia equipped. With manip equipped go to the beaches around Costa Del Sol until you fight these things that have blue tentacles, they usually come in groups of four. Have someone manipulate one of them, then have the manipulated creature cast big/mighty guard on you. The person(s) with E. Skill equipped will learn big/mighty guard, and can use it from there on. This enemy skill gives all three of your characters Haste, Barrier and MBarrier.

Also, you can buy accessories called white capes, which you will need to beat Sephy, cause having lost I assume you know how annoying it is to be turned into a frog. Hopefully you have 2-5 megalixers on you aswell, but they aren't overly important.

After kicking Sephiroth's ass for the first time, just always make sure everyone always has Mbarrier and Barrier. Have two characters always attack with your strongest spells/attacks, and have the third NEVER attack, just heal, and cast regen if you have it.