I think both arguments make valid points. And honestly, out of the three villains in the FFVII world (ShinRa, Sephiroth, and JENOVA), I believe JENOVA to be the bigger threat.

But, Sephiroth WAS the main villain. The party focuses almost entirely on Sephiroth and his plan to destroy the planet with Meteor, and NOT on JENOVA. Sure, JENOVA may have been a bigger threat, but she was not as focused on as Sephiroth was.

It is my belief that both Seph and JENOVA had different goals. This is ultimately what differentiates the two. Seph wanted to gather all of the energy from the Lifestream and become a god. JENOVA's intentions were simply to just destroy and move on to another planet.

Apart from most likely having the ability to control Seph, I didn't think JENOVA was very proactive towards her cause throughout the course of the story. If she did, in fact, control Sephiroth, why would he formulate this new plan of his which seemed to differ from her ultimate intentions? My point is, Seph took action, and was featured much more prominently throughout the course of the game, making him the main focus and ultimately the main villain.