Sephiroth is considered missing in action in my eyes, considering no one has confirmed him to have actually died in the lifestream, yet the whole thing with his cells melding with Cloud doesnt mean he is alive. It's like saying if I donated blood to someone, I would be alive in them. Which we all know isnt true.
All in all, I believe it would be a stalemate..... unless Sephiroth just happens to be leaning over the lifestream................ again.