I created one of these a while ago. Unfortunately, I couldn't complete it, because Guard Scorpion kept owning me at level 18 or lower. I figured most people aren't too willing to level up to level 20 in the first reactor, so what was the point of doing the mod? ... The thing about your mod is, you really need to test it from the beginning and bench mark character levels for bosses, like I did in mine for Guard Scorpion. Truth be told, the hardest part of the game, save for a few bosses, is the entire game up until around mid-disc one, since you don't have too powerful materia, accessories, weapons, etc.... You only have levels and strategy to go on.
To be honest, in my opinion, leveling up has to be the most boring thing this game has to offer. While I mean no offense towards you or your mod, that's all these "hardcore" mods do--make you have to level up insanely for parts that used to be easy. I'm sure some people would like the change of pace, but when I look at "harder difficulties" in RPGs, I tend to think of the Star Ocean series: when you increased the difficulty, the random encounter rate increased, enemy attacks damaged more, their HP multiplied itself, their speed increased, but most importantly, they were smarter with each increasing difficulty!
THAT is what these "hard" mods need...smarter AI. Not many people like to sit around for hours, mindlessly fighting battles to gain levels to beat a boss that used to be easy (which only adds insult to injury). Personally, I don't know how to increase the enemy AI, but I have a few ideas of what could be done. I think you'll attract more people if you make it so bosses will kill you because they outmanuevered you, not because they overpowered you. You might have to gain an additional level or two, not six or seven.