Plenty of protagonists have people stronger than them.
Look at Harry Potter. His archenemy is about a billion times stronger and knows more in the ways of magic. But Harry still was victorious over him.

Yeah, but Seifer and Squall are potrayed as relatively equal throughout the whole game. We were never really given any evidence to suggest that Seifer is, overall, a better fighter than Squall. Perhaps he has more raw power (ie can hit harder with his Gunblade). However, there are many more factors to take into consideration when deciding who is the overall better fighter. Tactics, agility, speed, the ability to think on your feet, determination, strength, magical proficiency, etc. are all things to be taken into consideration. While Seifer may have been the "beaten dog" and more vicious/tougher, you have to remember that Seifer and Squall are not dogs. Do you really think that strategy (or Para-Magic for that matter) ever comes into play when two dogs fight each other? If those dogs were humans, just as an example, the first dog would have a huge advantage over the second in that it could apply tactics/strategy to a given situation.

Of course, that is where our lack of in-game battles becomes a problem. All we have to go by is the fact that Squall beat Seifer on one occasion, fought him to a draw on an earlier occasion, and that Seifer was able to overpower Odin. That's not a whole lot to go by. I hate comparing FFVIII characters because of that. We have no idea how strong either of them are, really. We have no way of knowing how good Squall is with Para-Magic, how fast he is, how agile or durable he is, or even how strong he is. The same can be said for Seifer. Until FFVIII gets a CGI movie of its own, it's rather difficult to compare its characters.

The fact remains, at the end of the day, it all comes down to personal bias in this case. I'm no exception. Squall fans will always assert that Squall was stronger and Seifer fans will vehemently insist that Seifer was superior. The worst part is that there's really no way to prove or disprove them, either way. We just don't see enough of them outside of gameplay. What we do see puts them so close in terms of combat that it's tough to present an argument without coming across as just a little biased.

I kinda like the idea that at the beginning, and for most of the game, Seifer is strongest, but by the end, Squall is stronger. I'm not sure that this is entirely true, but if FFVIII was a novel (ie, you saw nothing in the way of stats or mechanics) then you would see this change.

Seifer is definetly stronger because squall was sent to the infirmery after a little slash above his nose. What a wuss

Seifer is stronger, I never liked Squall the whole game, So yeah Seifer gets my vote.

in my game id say Seifer sadly because i could never find the right items to upgrade my gunblade hah

I think Seifer is stronger at first, but after Squall obtains the LionHeart and that Ultimate Limit Break Lionheart he's invincible

Squall.