1) Cait Sith was most likely included because, well, he's a playable character in FFVII, and they wanted them all to be included. Of course he got nothing more than a glorified cameo, but hey, I'm sure some people would have complained had Square not included him.

2) Tseng and Elena were not killed in the beginning, they were tortured by Kadaj, Yazoo, and Loz. By the time they save Rufus they have been able to rest and recover.