After probably 15 or so tries, destroyed Sephiroth - Lvl. 83, HP 83, MP 13, used 3 Elixirs. All you get is a bunch of experience, and his journal entry for Characters 1 =P
I guess I'll document -how- exactly I did this...
Prepare for this right - equip as much MP and Defense boosting equipment as possible - Fire defense is also strongly recommended. As for abilities, you MUST HAVE Guard (or leave this off for a bigger challenge), Strike Raid (everyone will tell you, this is a MUST), Counterattack, and Second Chance. After that, equip all your MP Rages and MP Hastes, then all your Critical Pluses, then all your Combo Pluses, then whatever else you care to put on, but not the other specials (Sonic, Arcanum, or Ragnarok) - they'll interfere with Strike Raid. As for items, just fill up on Elixirs - as many as you can hold.
As far as I can figure, Sephy has 3 phases of attack. The first phase, you want to conserve as much of your MP as possible, so make it look like a real swordfight - parry and combo. Once you've figured out the pattern, it's actually very easy. Basically, he just walks up to you, and when he's a certain distance from you, he'll slash. He'll probably then jump, slash again, etc. He has two types of slashes - a quick one where he stays stationary afterwards, or one where he takes time to draw the sword, slashes, and hops backwards so you can't counter. When he does the first type, you have to tap guard a little bit before he actually attacks, then you can hit attack to counterattack him quickly, and turn that into a combo. After the combo, he'll vanish - dodge roll, jump, or you're good, guard immediately - this is a teleport counterattack. You'll need to reestablish your lock whenever he teleports too - he does this quite often.
After you wear him down to the next color of his HP, he'll stand still and taunt, then he'll dash towards you - but this is a fake-out! He'll teleport, and emerge on the opposite end of the arena, and start casting Soul Harvest (I think that's its name, anyways) - the move that takes all MP and reduces HP to 1. He'll do this quite a few times in this phase, too, just without the taunt to warn you. You can hear when he starts it - he has the courtesy of announcing the spell 4 seconds before he finishes it ^^; As soon as you hear him casting the spell, make sure you're locked on to him, and Strike Raid him (you should try to stay in the center of the Arena, or you might be out of range). Strike Raid is VERY important now - I consider it more a DEFENSIVE move than an offensive one, because if done right, you are kept completely INVULNERABLE for 15-20 seconds! This is very effective in this phase, as his attack pattern now consists of running and slashing (much harder to parry - and I typically don't bother trying), Soul Harvest, and Omnislash (if you don't feel like avoiding it, just Strike Raid right through it - if you start it in the middle of the attack, you'll be invulnerable until a bit after the end of it).
That continues until when you get close to his last HP meter. Here's where it REALLY gets interesting. I only got to this phase once, the time I beat him, so I don't know how accurate this is... but it starts with Sephy casting some kind of Meteor attack. The meteors appear and revolve around the entire arena, relatively easy to dodge but making it very difficult to heal. Eventually, he calls them back, and makes them all fall, basically an arena-wide "you die now" attack ^^; He did this to me 2 or 3 times, and I just Strike Raided my way through it every time - it never touched me even though it looked like the world was ending ^^; He is sparkling with energy now - basically following phase 2 attack pattern, but MUCH faster, and with the Meteor attack added to all the other attacks in his pattern ^^; At this point, I was kinda desperate to beat him, so I just did Strike Raid non-stop - about 10 times consecutively before enough of them hit to finally make him keel over ^^;
Phew... his death sequence looked remarkably similar to the end of FF7 - just a lot prettier ^^; After that is the basic Victory pose, and you get dumped back into the Coliseum lobby. No trophy or anything, just a page in the Journal ^^;
Oh well. I think I want to play a bit more - I still want to do Hades cup time trial - I'll write about Monday and Tuesday later ^^;