Good RPG with a funny story!
This is a nice attempt at making an RPG and is a build up from the Final Fantasy Game Engine that you created, which I had a bit of enjoyment. It's good to have a bit of variety of characters to choose from and each of them being a difficulty. Should've added a couple more characters though, but okay. Out of the four characters, the FF7 characters are the only ones with no abilities. The Sephiroth sprites seem to look like a modification of the Setzer sprites. The story itself was a bit funny.
There are a couple of more flaws than the ones you mentioned:
Let's start with the battle against the *famous cameo*, which I feel is a bit more real-time than the other battles: as Cloud or Sephiroth, when the *famous cameo* was about to perform a punch attack while on my turn, I immediately attacked him, which prevented his punch attack on me. As Terra while on my turn, the guy performed a jump attack, but I was foolish to use ice on him and missed but the guy's jump attack was excutable on me. Again as Terra, when the both of us were about to perform our attacks on each other, I didn't hit him but he punched me, sending my energy meter to 0% and lost my turn because the meter didn't move until he hit me again for the meter to move.
The battle against the Old Man was ridiculous. He wants to battle you, but doesn't do anything to you. When I thought of this, I picked Terra and leveled her up to 3 to get the Cure spell. When I faced him, I cured myself twice and waited for him to hit me. Afterwards, all he had to do was to say his speech bit and I didn't hit him once. Ridiculous!
As for leveling up, the highest level you can reach is 3. Once you reach that point, any amount of experience points beyond 2,000 is a waste and the maximum amount of experience points you can have is 3,000.
That's about it. I've only beat this game with Cloud and Terra. Overall, the game was pretty good!