CANON DUMP FOR ZACK \o/ Too lazy to play the video games but still want to know Zack and Cloud's TOUCHING STORY of INSANITY? Some awesome person recordered pretty much all the relevant plot points. Here I shall provide links along with a desciption of what happens.
Memories of Nebilheim - Arrival
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This is a part of the game that happens relatively early on. After escaping Midgar Cloud and co stop in the town of Kalm and everyone nags Cloud to explain his connection to Sephiroth. Cloud tells his version of the events which lead to the town if Nibelheim being destroyed five years ago. Note the hilarious memory gaps.
Memories of Nebilheim - Shinra Mansion
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Still recounting events in Kalm, Cloud tells the party about the mysterious basement in Shinra Mansion, that was full of research materials on Jenova and the Ancients. Sephiroth locked himself in here for days reading everything, and eventually goes crazy with what he finds. Continues to the part where Sephiroth kills everyone and burns the town down. Ends with Cloud confronting Sephiroth but he can't remember what happened after that.
Within the Crater - Muddled Memories
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This takes place at the halfway point of the game. Cloud and Co journey to the crater on the Northern Continent and go after Sephiroth. Sephiroth separates off Cloud and Tifa and starts showing Cloud the true memories of what happened in Nebilheim in order to fuck with his mind. This whole scene is basically Cloud denying everything, Tifa afraid to tell Cloud the truth because Cloud MIGHT GO CRAZY AGAIN, and Sephiroth being a bitch and using the information to convince Cloud he isn't real, just a failed clone.
Zack first 'appears' in these scenes, as the darked haired follow with Cloud's sword who is actually the one doing all the work.
In the Lifestream - The True Facts
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Up until this point, all the information regarding Cloud's memory was filtered through some level of lies. When he recounts Nebilheim, Cloud is seriously NOT ALL THERE. He's completely repressed and changed his memories to remove Zack and put himself in Zack's position. Then in the crater when Sephiroth is showing Cloud 'the truth' he's twisting it to say Cloud never existed and merely has memories of the things Zack did. He wasn't even at Nebilheim five years ago. This is the part where Cloud actually remembers what happened.
This part of the game takes place after the crater scenes. Cloud fell into the Lifestream that runs under the surface of the planet and washed up in a retirement sort of town way to the south called Mideel. Cloud is catatonic again and makeing creepy shrieking sounds and Tifa decides to stay with him. At one point there is an earthquake and the Lifestream bursts up under Mideel and Cloud and Tifa fall in. Tifa wanders around in the Lifestream and eventually finds Cloud's... psyche, which is all fragmented and horrible, and helps him put it back together.
Probably the longest single part of the game, these memories cover Cloud's REAL place in the destruction of Nibelheim: He was a lowly grunt in Shinra blue who followed Zack and Sephiroth around. No one remebered him being there because he kept his helmet on, too ashamed to tell people he'd never made it into SOLDIER.
Then they go on to Cloud's childhood in Nibelheim; where he was a quiet emo boy who wanted Tifa's attention and, unable to get it, became a bitchy emo boy who got into fights all the time. Eventually he decides to leave to become a SOLDIER.
Finally the TRUE EVENTS of the destruction of Nibelheim: Zack was the one who went into the reactor to stop Sephiroth, only Sephiroth kicked his ass. Cloud came in later and stabbed Sephiroth with Zack's sword from behind, and then went to look after Tifa. Sephiroth and Cloud confront again a few minutes later, and Sephiroth SKEWERS CLOUD but Cloud finds the strength to toss Sephiroth into the mako reactor. In the end, all of Cloud's memories of returning to Nibelheim were things Zack had done, except for these little bits.
Zack and Cloud - Last Memory
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Quite possibly the saddest cutscene in FFVII, this answers the question of what really happened to Zack and Cloud during the five years they disappeared, and how it is Zack died, and why his death literally drove Cloud insane. You get this cutscene if you go back to the basement of the Shinra Manor after Cloud gets his memories back.