Twitch, Vincent's damage charges up according to how many enemies he's killed, so to answer your question, you're gonna have to take him for a ride and just own some enemies 
Yeah I just knew about this. Thanks for pointing that out. Before I just thought that you just have to attack using Vincent for many times. The fact is that you need to actually kill (Final Blow), the enemy using Vincent's Death Penalty.
By the way, did anyone notice any other glitches? It happened quite a few times in my games, but basically the first few times you use a new materia combo it doesn't work. All and that works fine, just the less "used" combos, such as MP-absorb. I put it on Yuffie with Ice, and she cast Ice2, and it didn't give back the 10% of the MP as promised? After a few times it started working, dunno what's up with that ;/
IMO, this is because when you equip new materia, it is still a low level materia, therefore there would be no immediate effect. It would just work RANDOMLY. A MASTER level materia, on the other hand; may have an everlasting effect.
wat should i equip for the battle arena
Well, it is a single battle. I never had much problem with my equipped materia order in my 1st post in this thread. However, you should take note that after a battle in the battle arena; you will have to take your chance with the slots. "Materia Break" slot is devastating, especially if your character is too Materia dependent. Therefore, it is best that your character is strong (STATS wise) and you have plenty of healing items.