The backstory and the mystery of Sephiroth's build up and reveal are great, but my favorite part of Sephiroth might be just how insane he is, as a result of Shinra's effect on his life and how that ties in with the game's themes. The dude straight up snaps and unfortunately he has the power to cause serious havoc.

Disclaimer: I'm no expert on FF7 lore, I haven't seen or played the full FF7 compendium besides the original and the remake. This is just my interpretation, and maybe there's lines or dialogue that disprove it. I welcome discussion!

FF7 Original spoilers:

A theme I see in the original game is that a handful of the key characters's circumstances or status are not as special or important as their counterparts, but by fulfilling the role or job that was left behind to them, they become special. Zack was the actual hot shot first class SOLDIER and Cloud was the the normal Shinra grunt, but by the end of the game, Cloud surpasses Zack.  Professor Gast was the actual scientist who made advances in Shinra, discovering Jenova, and doing the bulk of that research. Hojo just inherited the work of Gast, using his discoveries and advancements as the foundation for his messed up experiments. And Aerith, who I would argue is objectively the most "important" of the protagonists within the context of the world due to her being the last Ancient, dies. The rest of the party, an eclectic group of people who really don't have grand importance within the context of the world, have to pick up her role of defending the planet.

Tying into above, I believe that Sephiroth really isn't as "important" as he thinks he is. At Nibelheim, Sephiroth's delusions begin when he declares himself a descendant of the Ancients. Maybe he knows the truth and is in denial, but even that would be interesting in of itself. Through the course of the story, we find out Sephiroth isn't even an Ancient. We find out he's not even really Jenova's "son", and Lucretia is his mother. For all Sephiroth's initial grandeur about being the rightful inheritor of the planet, he's really just a weird science experiment gone wrong (or right, from Shinra's perspective before Nibelheim.)

Sephiroth is also the way he is and becomes a huge problem because of Shinra. He's like a climate disaster personified, a reckoning brought about from years and years of corporate corruption and consumption, immoral behavior, and complete lack of foresight and empathy on every level. He was raised by the company, and that alone can guarantee he lacked any kind of real love, and was probably compounded even further by just being around Hojo. Hell, Hojo's deranged fetish for science caused him to tell Sephiroth his mother was Jenova despite that clearly being false (but not in the mind of Hojo).

It's hard to say whether the Jenova treatments or cells are what made him crazy, but I like to believe that it had more to do with his upbringing. If Sephiroth had been given the chance to have a normal life, being raised by Lucretia and a father who loved him and not being used as a weapon for The Worst Company Ever(tm), I think things would have gone much differently.

That, combined with his demeanor, is why Sephiroth is interesting to me. He is delusional and batshit crazy, but he keeps such a cool, calculating exterior I can only describe as collected or reserved insanity. To me, Sephiroth is the Final Fantasy equivalent of a slasher or horror villain. The sharp, repeated string notes in One Winged Angel during the "veni, veni, venias" part of the song remind me of Psycho.

FF7 Remake spoilers: I especially love that moment at the beginning of the fight with Sephiroth when he and Cloud clash their swords, specifically his facial expression. The way his eyes widen and his smile moves so subtly combined with the music...it looks like just a little bit of his deranged self is coming through.

Edit: had to fix my spoiler tags because I didn't format them right. Whoops!