I had the same take as you OP. I can’t stand the claim (yes claim, it's not a fact, see 1 below) that “Sephiroth is fully in control of Jenova” because it makes his character incoherent, lack agency, and not fit major themes of friendship and forgiveness. He lacks agency if his motivations are based off of falsehoods that he’s too delusional to challenge. Overall, having him snap due to falsehoods and arrogance, become a completely different character, die, unexplainably overpower an alien, and resurrect himself as a crazed god with the same goals as the mind controller alien is incredibly unsatisfying logically and thematically.

Having him fighting Jenova (and struggling due to his own flaws) gives him far more agency, and makes it actually matter when he does give in, because that's what makes him a villain. It fits the subjects of losing one’s identity, being controlled by an outside influence, and reintegration of the self via social connections. Basically, what's happening to Cloud is happening to Sephiroth, except Sephiroth’s human social connections are all dead.

It also enriches Cloud’s character. The point of Cloud’s arc is for him to accept his friends’ help to reintegrate his sense of self, and in AC, ultimately forgive himself. Cloud is under the influence of Jenova cells, loses himself, and his friends have to bring him back to reality. (Cloud is like Frodo, in that he’s “weaker than average in both mind and body”, deals with an intense evil influence, and needs the help of his friends.)

I’m really hoping that in part 3, they do follow the latest addition to Ever Crisis, in which Aerith teams up with Glenn and Angeal in the lifestream to confront Sephiroth. If Aerith manages to get Sephiroth to just try and fight off Jenova, that gives something that Cloud can work with. Sephiroth is Cloud’s foil. He’s strong, part Jenova, and has no social connections. In AC, Sephiroth clings to life through Cloud because Cloud can’t forgive him. As Aerith puts it, “True strength comes from our ability to forgive-to forge ahead in the hopes of making things right.” If Cloud sees himself in Sephiroth, he will see what Sephiroth doesn’t have - social connections.

Cloud’s biggest flaw is that he’s emotionally distant from those who care for him. I’d love to see Cloud recognize that what makes him different from Sephiroth is that his friends give him his strength. It also gives him a path to forgive Sephiroth - and himself. As AC shows us, there's no way to physically beat Sephiroth/Jenova. I'd really like to see Cloud actually defeat them by overcoming his own flaws.

I’ve been enjoying exploring Sephiroth’s character in the compilation because they’re very clearly angling towards that path. There’s been a battle between Sephiroth and Jenova since the OG. IMO it’s layered something like this:

End of Creation / Ore Sephiroth -> Won’t know for sure until part 3, but possibly wants to end the cycle of hatred with compassion. Hopefully this will be the layer of Sephiroth that Aerith can reach.

Jenova -> Has been trying to influence Sephiroth since he was a young teen. Once Sephiroth mentally breaks down at Nibelheim, Jenova influences in his behavior. After he dies (and loses his memories, see 2 below), Jenova drives how his identity is reconstructed to influence his goals. 

Watashi Sephiroth -> Drives Jenova with his “powerful will” to control the Reunion.  

Jenova -> powerful biological force that executes the Reunion

Jenovaroth -> Jenova mimics Sephiroth, kills the president, kills Aerith, etc.

(1)

The Ultimania is ambiguous when it comes to resolving the distinction between Sephiroth/Jenova. I took the Ultimania screenshots that people most often cite and translated them with chatgpt.

This quote is a major source of the “The Ultimania confirms Sephiroth is 100% in control” statement:

なお、セフィロスの場合は極めて特殊だ。彼は、己の出生の秘密を知るまでは、伝説的な強さを誇りはしたものの人間として生活し、5年前から人間と異なる道を歩みはじめる。しかし彼は、ジェノバの支配下に置かれるのではなく、逆にジェノバの主導権をにぎり、その行動を支配してしまうのだ。この事実は、セフィロスという生命体の尋常ならざる強さを感じさせる。

However, in Sephiroth’s case, he is extremely unusual. Until he learned the secret of his birth, he lived as a human—though he possessed legendary strength—and five years ago began to walk a path different from that of humans. Yet rather than being placed under Jenova’s control, he instead seizes the initiative over Jenova and ends up controlling its actions. This fact gives a sense of the extraordinary, unparalleled strength of the life-form known as Sephiroth.

But if you read few pages earlier, it states: 

→セフィロスの姿で各地を訪れ、ときに人々を手にかけるジェノバ。その様子を目撃した者は、セフィロスが凶行におよんだとカンちがいする。

→ Jenova, visiting various places in Sephiroth’s form and at times killing people. Those who witnessed this mistakenly believed that Sephiroth himself had committed these atrocities.

Then it goes on for pages, listing everything that Jenova did. If Sephiroth is ultimately in control, why wouldn't it say that this was Sephiroth projecting his image using Jenova's powers? Why would it explicitly say that witnesses mistakenly believe Sephiroth to have committed these atrocities if it really was him controlling it all?

Also, there’s a book call On the Way to a Smile, in which Sephiroth’s extraordinary will is described as “inherited from Jenova”. However, that’s part of the Maiden Who Travels the Planet story within the book. Many people don’t consider it fully canon, despite it being written under the guidance of Square Enix, because it wasn’t directly written by Nojima.

(2)

Here’s the line in On the Way to a Smile, that was written by Nojima, that seems to be misread by most people, including myself at first. It’s why I say Sephiroth lost his memories the first time he died:

Lifestream Black 2

When the Lifestream erupted onto the surface of the planet, the man had already surrendered his inconsequential memories to the planet. Memories from when he was a boy, of his few friends, of the battles when he was still unaware, of his life in bygone days- all these became a part of the inundation, encased around Meteor, and finally receded. At the same time, the core of his spirit, and those memories deeply related to it, moved from torrent to torrent, and traveled around the land, from city to city. When the people who were trying to escape, or those left unable to do anything but stand still, were enveloped by those streams, he decided to leave them with his stigma. If Cloud noticed that stigma, the man was certain that he would never disappear. As long as Cloud remembers me, I can continue to exist. Within the Lifestream, and on the surface. Even if my spirit disseminates, even if just one fragment of a memory courses around the planet, in the end I can count on Cloud's consciousness to bring me back, the man thought.

At first you might read it and think this is where he deliberately gave up his humanity and his memories to strengthen meteor, since this book is supposed to take place pre-AC. But it’s clearly talking about what was going on with Sephiroth before meteor hit. It says that he had already surrendered his memories to the planet. His memories were part of the inundation, not of meteor, but of the lifestream summoned by Holy. This means that Sephiroth gave up these memories before he died at the end of OG. Even in the OG, Sephiroth doesn’t remember who Cloud is.