Yeah Sephiroth can fly so even if there are clipping issues with the sword (I don't think there will be-- Spekkioland is small but not that small.) he can just fly up and do his crazy KH2 attacks or magic.
Vivi's best spell for massive damage would be Doomsday-- problem is that hits his team too and it'd only kill Ryu and Leon at best (and Lara and Ethan).
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No problem!
This is a cute and pop genocide of love!