What exactly happened to Nibelheim?

[Squall of SeeD]

Zangan also taught Rude martial arts so he currently has two students who would make bitter rivals.

That's never suggested by the game. The only student Zangan is known to have had is Tifa.

btw: were Wedge and Biggs in the orig. J-ver. or were they added by the Americans?

Yes, they were in the original version. By the way, the stuff added into the North American and International Versions was also added in by the Japanese, not the Americans or Europeans.