Hojo (the father of Sephiroth) used the sword of Sephiroth to kill everyone
I agree with you, except for this one line. Hojo couldn't have used the Masamune to do anything because it is made abundantly clear that only Sephiroth is mighty enough to wield the sword.

I know what you're all thinking. If only he could do it, then it must've been him that killed Shin-Ra, and so forth, but that's not true. Why was Sephiroth able to wield such a great sword? Because he was injected with Jenova cells while in Lucrecia's womb. So naturally, if it was Jenova's strength that strengthened Sephiroth, then Jenova herself would easily be able to do it, even if taking on the form of Sephiroth.

My questions:

When you go back to Nibelheim, it is not burned down. If Sephiroth burned it down, why is it still there? And why does no one there know Cloud, if he grew up there? And if he didn't grow up there, then why does Tifa remember the promise he made her at the well?

Feion