They would not have been able to erase knowledge of Sephiroth, he was famous. Genesis was not. NOBODY mentions him besides the fangirls in Midgar, who are really just Square poking fun at rl fangirls. And they DID erase all record of what Sephiroth did in Nibelheim, no one has any idea besides Cloud and Tifa. (I'm don't mean erasing EVERY TRACE of Genesis would be easy, much less realistic. But its not the biggest thing Shinra has hidden.)
And Cloud had no way of knowing about Genesis. Now, of course, had they known this back then they would have found a way to include it. But my point was that it does work. Whether its stupid or not is different, but it didn't retcon anything as Cloud would not have known about it and ALL our knowledge of the Nibelheim Incident came through him and Tifa.