Wow, nice lil topic to find in this guild. I've read the pages and these are my thoughts on it.
Sephiroth was always in the crater the whole game till the part when Cloud gave him the black materia. So the Sephiroth we saw killing people and tormenting the group musta been a clone. It makes sense to why Hojo called cloud an unsuccessful clone. ( I agree with the part of Jenova using her cells to control people in a degree) The clone was the successful one and had what memories it was able to get from the real sephiroth.
I can't remember Sephiroth not knowing who cloud was, but it coulda happened.
The reason Sephiroth knew of cloud was because of him seeing him after he was stabbed and I want to say Zack said his name. After Cloud stabbed Sephiroth, cloud checked on tifa and then Sephiroth came out and challenged cloud. Here is the clip (I hope) that shows it. Well, leads up to it.
http://www.youtube.com/watch?v=Hj-jtZMwrN8(if it isn't, let me know and I'll work on finding it)
The clip is from a lil movie that was made and is included in the special edition of AC.
The reason I partially agree with the cells controlling him(Sephiroth) is because it would seem like he would of gotten controlled earlier. But with them going to his birth town coulda activated them.
Also Sephiroth probably didn't know the information of Dr Gast's research. That info probably never left the labortory up north. So the only research he had access to was probably of Hojos.
But I doubt Sephiroth meant to fail, I believe he needed cloud and group to get everything set up for him and to release him from his Northern Crater slumber.