If you want a real challenge, try completing the game on the lowest level possible. The only enemies you can beat are bosses, and other forced encounters. I believe its possible to get to Sephiroth at L28. You'll have to let two of your characters die though, so only one of them gains Exp, so as to make you get the lowest growth possible.

Now therein lies a true challenge.

Its more than possible. You'll find yourself using items to do damage, and of course you can learn Death Sentence and use Tifa's Godhand weapon (which powers up her strength when under DS status, as well as low health). The Curse Ring can save you some time if needs be, but you'll be doing a huge amount of damage from Tifa (throw in Deathblow for even more damage).

Check some YouTube videos of Lowest Level challenges, it should demonstrate a few tricks (like getting Materia Keeper in Lucky 7's to kill itself with Poison). Remember Sephiroth gets stronger with a higher level Cloud, so at L28 he's hard but still possible.

http://www.youtube.com/watch?v=LgDJxDroCg8

Check that video there, and you'll see what I mean more clearly. Enemies can do Lucky 7s as well, and if under poison it can even affect themselves :-)

So umm.. is anybody going to do this or is it crap?

I have a challenge:

Beat Sephiroth at level 50. That means none of your characters can be over level 50. The closest I got was beating him at level 79.

Final: I'm currently at Level 91, and I have the three Master Materia. But, if you want, I can spend more time leveling up the rest of my materia.

I kinda did that on my first playthrough, I didn't level up enough but by some fluke I managed to defeat Sephiroth