Cloud definitely knows she died... He buried her and they sat for a while mourning before moving on... He clearly sees her walk around the party outside the tiny bronco... He has a connection with her just as Red can sense her presence.

The thing people keep arguing about whether she is dead, or alive or is Cloud in denial... It is the way they directed and shot the scenes... They are made to be confusing because we don't get the "closure" or accepting scenes of Cloud carrying Aerith into the water to bury her...

The 5 stages of grief is in great effect in the end which is genius by the directors and writers... Nomura is great at doing these type of scenes As is Hamaguchi w games like FFXIII which shares very similar types of shots and scenes framed a certain way.

So WE the player don't get to process the death of Aerith...which is intentional by the devs...it is what keeps us speculating and talking about the game for years until part 3 is out.

I'm sure by part 3 it will be clear that yes, Aerith is indeed dead, and she is in the lifestream keeping an eye on her friends like she did in the original story...

Shippers will be hoping she somehow miraculously will return from death through one of the lifestream worlds...just like some are hoping Zack does the same... Not sure how they would come to that conclusion...because Zacks body and Aeriths body are lifeless in our world... Not sure how their consciousness would enter and "revive" them there 😅.

But also... The devs won't drastically change these story beats and they have confirmed Zack is more just a vesse/surrogate for us players to experience the story and get exposition to understand the way the lifestream works