My only major issue with that version of events is this one:

- Far from dead, Sephiroth washes through the Life stream until he ends up at the Great North Cave. Having assimilated the knowledge of the Ancients while
in there he begins to formulate a plan to turn himself into a God. This
involves summoning a Meteor to cause a big enough wound on the planets surface
to make the Life stream rush to one place, where he can absorb it all. Over
the next 5 years he experiments with controlling the Sephiroth clones remotely
and projecting himself psychically. His physical body however remains in the
Great North Cave for the duration of the game.
It seems somewhat odd, that immediately after losing his mind and therefore giving a prime opportunity for someone to take control of him, he just happens to develop exactly the same desires and abilities possessed by Jenova.