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IIRC, Cloud wasn't in SOLDIEE, he was just a regular grunt who had the physical ability to qualify for SOLDIER, but didn't pass the psyche evaluation, or something like that. He became a de facto SOLDIER as part of Hojo's later experiments, but he was never an official member.
No Cloud was always a mental case, being said mental case is why no soldier stuff. As for how Sephiroth could Mind fuck Cloud. Seth knew what buttons to hit. As I think exposure to the Life Stream And Jenova cells ( one, the other or both) gave Sephiroth some telepathy to screw Cloud over.
He did a similar trick to party member at the Frozen north.
Even if giving Sephiroth what I said, Kenshiro kills him faster than he can get something going, also Kenny has no emotional baggage stuff I mean hell the sadder he is, stronger his murder game.
That was after Sephiroth got dumped into the Lifestream at Nibelheim, when he and Zack were experimented on by Hojo for years (and Cloud got theJenova/Mako treatment for the first time) and Cloud's already fragile mind got shattered and he imprinted on Zack's life.