Signed up just to give some feedback here.
I probably should have been writing this as I played instead of after I finished but whatever...
First reactor - Whoa nelly. Way too hard for the first area. This might be an appropriate difficulty if your intention was a "hard difficulty" version of FF7, but if it is just a rebalance, don't assume that players are masters of the game at the very beginning. The first area of any game should ease you into the game, difficulty-wise.
Guard Scorpion - This battle was easier than some of the random battles in this area. Definitely not right.
Part of the reason I found Guard Scorpion so easy is probably after seeing how hard the enemies in this area were, I decided to grind for potions a bit. So I probably went in a level or two above the norm.
The section right after the train (I really need to learn what these places are called) - The rocket guys with their sleepy critter companions are vicious. Tifa got the crap beat out of her here, and I didn't exactly have a surplus of phoenix downs so...
Air Buster - I entered the fight with two limit break at the ready. Two limit breaks later, the fight was over.
Aps - Water heals him? But taking a tidal wave to the face damages him? Also pretty easy.
Turtles (I dunno what they are called) - That royal guard is a royal pain. They just sit there and cast it on themselves over and over. How about give them 1mp and make royal guard cost 1mp, just to prevent endless boredom. Also I think their stab attack didn't have a sound.
Reno - He seemed, inactive at best. His most common move seemed to be the pyramid, which cost him one turn, and one of my guys a turn, which means every time he did it, I basically got 2 free shots on him. Also, it took me like 20 turns to successfully steal from him.
Shinra Soldiers at HQ (the red armored ones) - Barret was back attacked and took over 500 damage from the "double shot" attack. Wee bit powerful.
Teleporting enemy with mallet - I don't know if he was supposed to, but at one point he just vanished for a while and all I could do was sit there and wait for him to return.
Sample: H0512 - besides the opening attack, I was not attacked at all during this battle, all the way up to the point when I got an error and had to escape it. If he is going to revive his buddies each time one of them dies, they need a lot more health. Even then, perhaps it would be better if he only did it when two of them were dead.
Elevator boss - This guy seemed pretty good. I don't remember vanilla version, but I thought the status effect bullets seemed odd at least. "I will shoot you with my sleepy bullets!" I think this guy is the only non random battle which actually killed a character (Aeris).
Rufus - Already mentioned, but Dark Nation disappeared pretty quick. After that the match becomes pretty boring as all he did was use his shotgun. It was pretty powerful, but pretty boring.
Motor Ball - This guy, while he did take a beating before dying, didn't actually offer much resistance. He basically sat there as I tore him apart.
I also noticed the mechanical bosses were healed by lightning and (at least) motor ball was weak to water. While this does makes sense in a way, it also kinda goes against all my rpg experience which says "cast lightning on machines."
Barret seems like he has a bit too much HP.
Tifa probably could use a slight HP boost. Also, I don't know if it was intentional, but her limit breaks are devastatingly powerful. In this case it seems like the whole "low health, high power" concept might have gotten a little out of hand.
Aeris did not have quite as much Magic as I had envisioned. I assume she is the primary spellcaster?
Did not get to use XIII enough to notice anything.
I liked that you took out the stat mods the magic materia had. I noticed they was left on revive though, which I assume means you left them on the more powerful materia. How do you envision that working out? In my head it seems like it would just make the magically-inclined characters even more so, which shouldn't be necessary as you have started to differentiate them from the get-go.
Can you change those hints you give out in battles to only appear the first time? I think I was told about the sleep ailment five times.
As a guy who has only played a couple of the FFs, this next one bothered me more than it probably should have.
Why did you change the Sense and Enemy Skill names? They may be Libra and Blue Magic in the other games, but in this one I think they are kind of expected to be Sense and Enemy Skill. Regardless of that though, If you changed those to sync up with other games, why not change the other spells?
Random thoughts for later parts of the mod:
Have you considered making Independent materia which solely serve as stat boosts? It could be useful for non-magic users. Similar to HP+%, but without the %, due to... not wanting to break the game. Something like Strength +, which as it levels, the amount of strength granted also increases. +2, +4, +6, +8. Just a thought.
I'm also curious to hear what you are planning to do with KOTF, HP+%,MP+%, and ultimate weapons. I had always promised myself that when I played FF7 again, I would do it without those due to how overpowered they were.
Most of the other things I noticed have been mentioned by others so I'll leave those out.
I definitely want to see what the next part is like, because I realize that the Midgar section of the game is probably the most boring due to the lack of options a player has. You really can't throw a bunch of materia at the player at the beginning and say "have at it."
Woo, that took a while.
Well, good luck. Hope this helps.