Well, let's give it a shot
takes a deep breath:
Seph did seem to have had a couple of upgrades since the last time. Essentially, his energy attacks such as this
sword beam, this
unnamed one or
Draw Slash, all also count as Soul, Info and Spatial hax (which from what I am seeing the Bros don't resist in their base key) thanks to his Spirit Energy due to the way the Spirit works in FFVII. But this doesn't extend to his regular attacks, which can be normally blocked or parried.
Though Sephiroth can handle himself well enough against two skilled opponents, said opponents were also weaker than him, Mario and Luigi can kill Sephiroth with as much as a tap and Sephiroth, by all intents and porpuses, can't block attacks, they will just disarm him, shatter his arm or simply break through the Masamune. Though dodging is still a possibility and Sephiroth can also teleport out of the way, but this is made less effective by Mario and Luigi having a telepathic link and being able to coordinate that way.
There is Heartless Angel, but it requires a brief moment of concentration, which the Bros can exploit, and unlike the main FFVII variant where he can immediatly cast on all enemies, here he can only target one.
The other option Sephiroth has are his Four conjured Elemental Materia which will cast elemental Magic on Sephy's opponents. While the elemental spells per se are not much of an issue for the Bros, given Magic in FFVII also uses Spirit Energy but coming directly from the Planet it also doubles as Soul, Info and Spatial hax. Though the Bros should be able to deflect at least some of the spells or dodge them (I can't recall if you could block lightning in Mario and Luigi games) and they can destroy the Materia with a single hit.
All in all? I'd say Mario and Luigi? In their base form they don't really have much against Sephiroth in terms of hax and can be one-shot by some of Sephiroth's abilities, but they can win with a single touch with any attack. Sephiroth needs to use specific abilities and more beneficial scenarios to pull a win. Also it isn't until the original FFVII he gets support abilities that would really save him here, like his mind/memory reading (clueing him on how outmatched he is in terms of stats), illusions and his telekinesis (to create proper openings or avoid) or his immortality and regeneration.
@The_Pink_God : I think the Tier 2 KH chars are now Low 1-C smurfs.
