I think this is a rather difficult question to answer. First, what are the rules for the engagements? If each is playing by the rules of their own game, then Squall could win easily. He just junctions Initiative with low HP, one Renzokuken and Cloud is dead as soon as the battle starts. Then too, Squall can limit over and over again with Aura. He doesn't need to wait for his gauge to build, like Cloud does. Of course, Cloud can equip sixteen mastered Counter Attack materia, and Squall will go down before he knew what hit him. Since the max HP of each character is 9999, the battle will be over quick. If Squall doesn't get off a limit break immeadiately, Cloud could take him out with a single use of 4xCut (from a mastered Double Cut materia). Cloud also has the advantage of being able to use his magic without reducing his stats. Still, doing 9999 damage is no problem for either character. Whoever got off the first major attack would win. Cloud's normal abilities pack more of a punch than Squall's, but Squall has the advantage of the limitless Limit Breaks. If Cloud was able to survive a Renzokuken (doubtful, considering the damage it does), then his Limit Gauge would still not be full (assuming that it was empty to begin with), since a level four Limit Break needs more than Cloud's entire HP bar to drain in order to fully charge. Of course, in the turn it takes Squall to cast Aura, Cloud can whoop his butt. Or, if he goes in with low HP, Cloud could kill him with one hit. Since either character can dish out much more than they can take, the battle will be decided by whoever gets the first heavy strike. Squall has the advantage then, since he can junction the Initiative ability and automatically go first. But, if his first hit doesn't kill Cloud, he won't have time for a second, since Cloud can counter more than a dozen times and hit four times for every normal attack.
Personally, I think it's a really pointless discussion, since I think the two would not fight. They'd get along great. Both are mercenaries with traumatic pasts...
(Oh, and just a note, when Seifer used a fire spell and followed it up with a sword slash against Squall in the intro video, why do so few people seem to realize that he was using his limit move, Fire Cross? It looks exactly like it. Which means Squall had Seifer down in low HP, and Seifer broke the rules and used his Limit Break on Squall. Squall not only survived, but he immeadiately countered. So I don't think arguing that Seifer whooped Squall in the intro is really valid. Seifer was getting his butt kicked, he cheated, and he still got bi+ched.)
(One more thing. I also think that calling Sephiroth a "general" is a bit of an overstatement. Yes, he was the commander of SOLDIER, but in rank only. He didn't pick his assignments. He was just a really powerful field agent.)
