Hmm, now I do believe he doesn't have a lower half. You can see rocks behind him where his abdomen should be.

Maybe the FMV artists didn't have enough time to finish him or thought, "The scene goes by so fast, they won't notice. Their attention will be drawn to Sephiroth's face and chest." It worked on me. I rarely watch the beautiful FFVII FMV outside of the game, and I usually have not analysed them frame by frame.