Except that the Materia Blade is just as large as any other sword. It's actually smaller than the Excalibur, if memory serves.

Cloud's purpose is just a fun little extra. FFVII was a rather large hit, and it was extremely popular. Including Cloud as a fun extra was probably expected to help it sell more copies, after all the tactical battle system of Final Fantasy Tactics wasn't something explored often in games, and something Square hadn't touched before.

I mean seriously, as much as it wounds me to say this how many people only bought FFT because they heard Cloud is in it? Probably a lot more than one might think.