Just a note for writing that I am leaving here:
What if Sephiroth didn't "go crazy"?
What if he just had a skewed perception of what was "evil" and what was "good" this whole time, and Nibelheim simply switched his perspective on who and what was a good and worthy cause to fight for?
For example, if Sephiroth originally believed "all people are good, and I am strong enough to save them, so I will. Shinra is a little messed up, but there's no better alternative for the world, so I will stay here and do as much good as possible" this would make him the generally nice guy who looked out for and protected people under his watch person that we know (and would explain why he and his friends never turned on Shinra sooner). But then if the discoveries in Nibelheim and their information overload slapped him in the face with a "well actually, people, particularly those at Shinra, are complicated and can suck really, really, really bad. Are they really worth saving? Does being a hero really mean a damn thing?" then I could totally see his personality doing a 180 in that scenario...since it's something I kind of when through myself after a traumatic incident.
We always remember this line because it seems like Sephiroth is despairing at the thought of not being human. But what if he is really just despairing at the thought of just how deeply mistreated he's really been...as in a "Am I truly just one of his experiments?" kind of despairing? Kind of like a "it's bad enough that Angeal and Genesis had to suffer because of Shinra's clearly unethical human experiments, but I am drawing the line at myself because wow is my situation very, very fucked up...and lead to my friends's own suffering in the first place." In short, there was probably way more going through his mind than just "Am I human?" in that moment.
For the longest time, I had trouble accepting that the "good, heroic Sephiroth" would just do a 180 in one week after discovering the horrible truth of his origins.
Like, yes, your story is bad, but talking to someone would have shown you that it wasn't the end of the world. Heck, Crisis Core makes it clear that Genesis and Angeal being monstrous didn't bother him so much as them just not reaching out to him and trusting him for help/trying to talk.
Sephiroth going nuts is something I have been unable to accept because it, logically, did not make sense. If you saw Sephiroth as a genuinely good person who cared about others, despite being Shinra's top killer, and who worked to do heroic good despite the obvious evil that Shinra was, then he should not have gone crazy. He should have just, as planned, left Shinra.
Sephiroth WAS a good person with a kind heart, so how could he just "go crazy" when going crazy doesn't work like...THAT?
Why did he "break" so badly and never show remorse or conflict about his decision to kill everyone and burn the town?
Heck, why WOULD he take a detour to burn the town instead of just heading straight up the mountain IF he went genuinely crazy?
So. I have come to a conclusion.
He simply decided that the common man was no longer worth saving.
And this was not a decision he made lightly...seeing as he spent seven days in that basement. No. I think he was struggling to find a reason to keep fighting for people, to keep being the hero, and he just...didn't find it.
After realizing and reflecting upon the depths of Shinra's depravity...
After realizing your parents were in on it with (seemingly) no remorse...
After learning the man you deeply looked up to had headed the unethical project only to abandon it (and you) as if to wash his hands of it and live a normal life before dying (and dying conveniently too)...
After thinking on (or perhaps reading about) the history of the Cetra and humans and how horrible and selfish humanity really can be...
After thinking about modern humans and how they are still selfish, caring for only their interest and what things mean for them and never bothering to look beneath the surface at what dark truths may fester ther (because if anyone had bothered wouldn't they have questioned the truth long before now?)...
After, possibly, re-living your every loss, every abuse, and every horror, and realizing that it had no good meaning...
...Sephiroth simply gave up on believing in people and decided to fight for his "mother's" cause...because Jenova had never betrayed him. It was thinks to Jenova's power that he could fight and live and kill anyone who stood in the way of his goals. How...could he not fight for "her"?
To quote a certain Stormblood villain from FFXIV:
"These people, our people! They ignore the corruption that festers beneath the surface! Cast aside that which is dirty and broken! Speak naught of things that will disrupt their dreary little lives. And you (insert spoiler name of a douchebag)... Always pretending not to see... You were the first...the first I swore to kill..."
And that's why he burned the town instead of just going up the mountain, because the townspeople, in that moment, were the closest humans who embodied everything he now hated.
And, of course, this would have been Sephiroth's personal conclusion due to being completely detached from humanity after this decision. He decided for himself that he would not fight anymore for them and never once went back on that decision. He spared Zack because, to some degree, he still cared for him at the time...but not killing him right away was all he was going to do.
And those are the thoughts I will play with in my story writing.