Finally I get to answer someone else's questions
What was your first thought when Bugenhagen asked to go to the Ancient City, and then when you found the Key to the Ancients?
I have no idea. I was a bit lost on the whole story the first time I played the game and was probably happy just to see where it went without questioning it too much.
What did you think of the plot developments leading up to the return to Midgar, and of the pre-Midgar re-entry sequence itself?
The Keystone scene at the Forgotten Capital is one of my favourites in the whole game. It's beautiful, and it gives the player a renewed sense of "let's get Sephiroth", which was temporarily forgotten while chasing after Shinra and the Huge Materia. Of course, the next part of the story involves going after Shinra, but that's special in its own way. Going back to the place where the first hours of the game happened is good fun, and always makes me think about how much has changed since then. Imagine trying to take on the Sector 8 monsters with just Cloud and Barret at level 7, their initial equipment, Ice and Lightning materia, a handful of Potions and a single Phoenix Down. Good thing the enemies keep to their own sectors...
Since now almost all sidequests are open to you, are you planning on completing anything before returning to Midgar? (Chocobo breeding, materia caves, Key to Sector 5, Sneak Glove from weapon seller in Sector 6 (it's expensive!), various ultimate weapons and limit breaks).
I had already got the Quadra Magic materia using the Highwind trick, but I took the opportunity to get the Key to Sector 5 (and with it the Sneak Glove and the Premium Heart), Final Heaven (even though I'll never use it) and probably something else I've forgotten.
Did you collect all the items in Midgar? The underground section can be challenging to navigate for a first timer, and a lot of the items are missable (Barret and Cait's ultimate weapons for example). Did you return to Shinra HQ and collect the items available there?
I missed quite a lot on my first playthrough, including Barret's and Cait Sith's ultimate weapons, but I have made sure to pick them up in every subsequent playthrough. I took the stairs in Shinra HQ to get the Elixir and Behemoth Horn, having busted on in the first time I visited there.
The return to Midgar features a gauntlet of boss fights and more-difficult-than-normal average encounters within the Underground itself. How did you do against Diamond WEAPON, The Turks (if you fought them), Proud Clod, and Hojo's 3 creepy forms?
Diamond WEAPON - not being able to deal any damage with physical attacks hindered me greatly. I think I spammed Magic Breath and the occasional Magic Hammer while keeping Cloud's HP up, then finished him off with an Omnislash.
The Turks - this was another one of those battles that became a completely different challenge with only one character, because there are three Turks and they get a LOT of turns in. Rude's attacks were taking off about a fifth of Cloud's HP each turn, despite him being in the back row, so I had to keep my defences up with Big Guard and Regen. Even then, I had to cast the occasional Cure3 spell. That didn't leave a lot of time for dealing damage, and because I got too eager to finish them off, I got a Game Over the first time I tried fighting them. I then decided to pick up the W-Item materia and all the Sources from the southern tunnels in order to strengthen up a bit before taking them on again. It made a difference; I was able to survive more attacks, so I could deal more damage. It took me a long time to steal the three items, but after that, I used two Omnislashes, a few Double Cuts (more reliable then Deathblow-Added Cut) and finally a Quadra Ultima to try to finish all three of them off at the same time. It didn't quite kill Elena, but I got the EXP from the other two.
Proud Clod - pathetic. None of his attacks did more than 700 damage to me, and many of them were so weak that Regen healed Cloud to full HP immediately afterwards.
Hojo x3 - very easy as well. The Mystile meant that Deathblow became a better option than Double Cut again, so I used Deathblow-Added Cut and Counter Attack to pummel him into submission.
The hardest battle I fought in Midgar was not any of those bosses, however. It was actually a pair of SOLDIER:1sts who attacked me from both sides on the Mako Cannon gantry. They both had a turn before Cloud got his, and they both attacked/used Sword of Doom on his back to deal double damage, giving me a swift and completely unexpected Game Over against them. When I reloaded, I got into the exact same battle, but the second time, one of them attacked his front, which meant I could kill them off in consecutive turns and finish the battle with a few hundred HP.
What did you think about the revelation that Hojo is
I remember being completely unsurprised when I learnt it the first time. It made complete sense (unlike a lot of other things in the story). Funny how I had a completely opposite reaction to Lex.