Well, the other day I was thinking to myself "Which game is better - FFVII or Chrono Trigger." Even though I didn't come up with an answer to that question, it did get me thinking of the depth of FFVII's story. Here's what I came up with on the Sephy/Jenova theory. (Some of it seems backed up by proof, alot is just speculation.)
The 'Sepiroth' you chase the around the world on Disc 1 is actually the headless Jenova Hojo had contained in the ShinRa building. If you remember, at some point in the game (Jenova or Sephiroth, I can't remember which) says "The power to change one's appearance is Jenova's" or something along that line. Also, the confusing dialog between Cloud and Tifa in the Nothern crater where Tifa says "So you mean it's not really Sephiroth we've been chasing this entire time." (It's my opinion that something was lost/screwed up in that conversation during the translation.)
As far as who's in control - Seph or Jenova - well, with my theory, it's kind of hard to just pick either or. You see, as I take it, Sephiroth IS Jenova. His thoughts/experiences and Jenova's thoughts/experiences are one in the same. He was injected with Jenova cells at his conception, and he grew to be made up of some human genes, and mostly Jenova. For all intents and purposes, Sephiroth is a genetic clone of Jenova. Hence the Number one on his arm. He's the first clone (of Jenova, not himself.) As far as Sephiroth being a victim - it depends on how you look at it. If you take Sephiroth for what he is - Jenova, then he is not a victim. He is the ultimate evil. But if you look at Sephiroth the human, what Sephiroth should have been hadn't Hojo tampered with him, and you see that his life, his free will to choose to be good or evil, his memories, etc. were taken away from him before he ever had the chance to live - then yeah, you could consider him a victim, depending on what your view is on conception and life.
Jenova knew that her body (the headless thing in the ShinRa building) was physically dying. (This is shown at the end of the game, when you fight Jenova. If you don't kill her in the time allotted, she just self destructs and dies. I'm not sure if she's supposed to do something that kills your characters, because the one time I actually witnessed what happens when the counter runs out, Jenova was out of MP.) She knew that, through Sephiroth melding with the planet, her essence would live forever, as Sephiroth. Which is why the reunion took place in the Northern crater - Jenova's body was gathering where Sephiroth was, preserved in Mako at the center of the crater.
Jenova (from here on out, unless I specify otherwise, when I refer to Jenova, I'm talking about her headless body.) knew that she needed to get the black materia to the Northern Crater. She took the form of Sephiroth, because she knew that form would intimidate people (especially Cloud. Cloud played an intergal role in her plan. She knew Cloud was powerful physically, and she also knew that she could easily take control of him when the time came, because of the fact that he was mentally weak and had Jenova cells in him.)
When you fight Jenova at the end of the game, that body dies. Then you fight Sephiroth, who is of course enhanced by the power of Jenova, since he IS Jenova. When you defeat the One Winged Angel, Jenova is dead.
The battle between Cloud and Sephiroth, I believe, is taking place in Cloud's mind. It basically is to symbolize Cloud finally being completely free from the influence of Jenova. Even though he'll carry the DNA with him for the rest of his life, since the essence of Jenova is dead, it doesn't matter. He has his own free will back and doesn't have to worry about being controlled any longer.
I pretty much think that's what I came up with - if I think of anything I forgot, I'll just add it in later.
