I don't think it's difficult to understand what happened to him. He was a loyal friend to Aerith for years, and went out of his way to help Zack for her sake. Then she turns around and joins forces with Avalanche. We, the player, know - or assume - that they are fundamentally good people, but they have just blown up two reactors and killed a lot of people both directly and indirectly. Judging from Barret's rather unbalanced behaviour, and Cloud's arrogant indifference, we could be forgiven for wondering if these guys weren't actually the bad guys, and in fact I'd say the only reason we know they are the good guys is because they are our playable characters. We don't need to add BC into the mix to make my argument valid, but if we did, you have to remember that from Tseng's POV Avalanche is an organisation that recently tried to annihilate the entire world in order to save it from Shinra. And now Aerith, the "magnificence existence" of Tseng's imagination, has thrown her lot in with these terrorists. How would you expect him to react?
(What surprises me is that Aerith didn't lie to him. "Oh Tseng, thank goodness you've found me! I was kidnapped by terrorists; they made me to go to Don Corneo's mansion! They stole this poor little girl, too. They've been forcing her to work behind a bar! But we managed to escape. I'm taking her to my mom's house. Won't you help us get there safely?")