One one hand, making Wutai mandatory places Yuffie firmly into the narrative and then Wutai can be easily expanded in regards to their "quarrels" with Shinra in the past. I'd like them to include some more Crisis Core lore there.
On the other hand, keeping Wutai optional is better from a gameplay standpoint. Since you get robbed of most if not all Materia for a while, it's better to provide the player the ability to choose when to undergo that limiting segment, e.g. after obtaining all physically strong no-slot equipment.
If Wutai becomes mandatory, the game should provide preparatory material, like those no-slot weapons before and in Rocket Town to not have the player stranded with no Materia and crappy gear. Or maybe those strong no-slot weapons are obtained on the way to Wutai?
In any case, if handled well in terms of balancing and gameplay, I'm fine with either.
In regards to the Huge Materia quest line, I'm in agreement with you guys. That part needs some major overhaul. I can't provide any meaningful suggestions as of right now, since I haven't put much thought in it, so I'll leave it at that.
And the reasons and motivations for Rufus wanting to take the Tiny Bronco from Cid despite having a whole military apparatus at his disposal need to be made clearer or changed as well. As it now stands, it's rather nonsensical and silly (not the part with Palmer. That one's perfect!)