I'm gonna have to disagree about some of this. As powerful as Sephiroth may be, I'm pretty sure ACC was the end of it, considering what he had to do to last that long to begin with. It'd also get tedious to have Sephiroth come back again in canon,so it's not something I think would turn out well in a new game, especially if redemption is going to have a part in it.
Another issue I find is that revealing any more info than they already have regarding Sephiroth would risk revealing too much, since lack of information regarding him serves a role in the narrative. However, I'm of the opinion that fanfiction is a great way to toy around with whatever can't or won't be used by canon, as well as putting new spins on what is.
I guess we'll agree to disagree here. OAO Advent Children established that Sephiroth's will still exists within the Lifestream. With it, he conjured up the Remnants as avatars. Even the final line of Sephiroth 'I will never be a memory' implies a future return (which game creators acknowledged). What's to stop him from simply creating more avatars down the road? Cloud only defeated his puppets (remnants). He cut the tail off; not the head. Sephiroth's essence still resides in the Lifestream.
If anything, FF7's narrative repeatedly reinforces this journey toward self-actualization. Genesis found his when obtained the answers in LOVELESS. Kadaj came to full circle when he willingly gave himself up to the Lifestream (after hearing Aerith's voice post-Cloud battle). Even Hojo found closure by giving up his body to become one with science (making both his son and himself worthwhile living experiments). And of course, there's Cloud who found his forgiveness.
While I'm content with Sephiroth existing as a villain for all eternity, he isn't a Kekfa or a Joker (the pure evil character archetype who finds self-actualization through chaos). Sephiroth's story is more in line with Darth Vader's path. And much like Darth Vader, his path is 'incomplete' until he either gives up Jenova and goes batshit for the giggles (ie, transforms into pure evil)... or he finds reconciliation within himself. Heck, Sephiroth's own name implies a path toward actualization (the Tree of Life).
We don't get too many FF games that follow the villain returning to hero, so I don't think it would be boring at all, especially since this gives us an opportunity to introduce a new (possible bigger) villain. In the Star Wars series, Yoda warns that there are always two. No more, no less. Similarly, in FF7, we see the theme of 'legacy' pop up a lot. We see the legacy between Angeal with Zack. We see the legacy between Zack with Cloud. And we even start to see the legacy between Cloud with Denzel. What we DON'T see, though, are the legacies held for shady characters like Sephrioth. For Sephiroth, he was obviously trained by an excellent swordsman. No way did Hojo train Sephiroth. And no way would Hojo allow just any mediocre guy to train the perfect experiment. He would've wanted the best. We also know through implied dialogue and scenes, Hojo and Sephiroth didn't get along and weren't close. So Sephiroth's upbringing was tied to someone else; someone who likely reinforced Sephiroth's indifferent attitudes towards humanity. Sociopaths aren't born; they're raised. *Someone* had trained this child as a weapon of destruction. *Someone* gave Sephiroth the idea that it's okay to take what you want. That *someone* was likely his own mentor.
Of course, I'm just tossing ideas here. But it does show that you can still expand on the FF7 universe while not starting with your typical 'and then Sephiroth rose and tried to rule the world again and blah blah blah' type of plot. I agree, that gets boring (it's why I'm still on the fence with AC). That's why we have to look at the story from another angle. We could take the theme of legacies to a new and darker level by focusing on characters like Sephiroth or even Genesis (who many fangirls like to forget killed his step-parents and was an ass to Zack).