What I don't understand is if Sephiroth had power over the lifestream to the extent you say, why didn't he just flood the world with lifestream. The lifestream almost killed Cloud (alot of things almost kill Cloud though..) so it should do a fairly good damage to the worlds population. I'm also pretty sure I hit Sephiroth with magic a couple of thousand times.

And you understanding PuPu was wrong(No offense to Pu), Kefka wasn't the source of all power by any means but at one point, while in the middle of the statue triad, spells are thrown at him, they're just basically deflected into nothing. No final boss absorbs magic, if that happens when the world of video games is screwed.

Point being, Magic = Statues, No Statues = No Magic, Espers = Magic, No Statues = No Espers.

I'm also pretty sure I hit Sephiroth with magic a couple of thousand times.