I saw that part too where Denzel's eyes were cat-like. And in Midgard, the children walk around zombie like (from what I've read), so I think that maybe Kadaj does have some hold on the children. Kadaj does begin to circle Cloud, sayong, "He is our brother, but he is a traitor." SO I guess he's a traitor because of the fact that he fought Jenova and Seppy and denies relation to Seppy.
