I don't know, the whole angel thing was jarring for me in the first place, considering what angels had already become associated with in the series. There's Aerith's Great Gospel with totally unexplained angelic creatures (lol what is FF7 cosmology), yeah, but nearly any fan will think of Sephiroth's One Winged Angel first. The original game and AC both go "WINGS = BAAAAAD", and CC doesn't exactly help with all the Genesis copies. The whole conversation with Cissnei and Zack talking about wings and freedom just left me thinking "wings aren't freedom, they're feathered madness."
Then again, AC did set a precedent for ascension with Kadaj and Aerith. I guess I was more okay with that because Aerith had already been set up as a savior-type figure, even in the original game, and it didn't seem to break the mood as much.
Cloud's instability really doesn't show very well, yeah. If someone started off on CC knowing nothing of the original game, I wouldn't expect them to get what happened between "thanks Zack. I won't forget" and the "I'm Cloud. SOLDIER First class." at the very end. They'd probably think that with the message of brotherhood in SOLDIER the game has, Cloud figured him being Zack's legacy and carrying his pride and dreams made him a SOLDIER, if unofficially. Not that Cloud had totally and completely had his brain broken, and was convinced he actually had been a SOLDIER five years ago.