In both the original Final Fantasy VII & Advent Children, the scene with Sephiroth in Nibelheim's flames had him emitting a Psycho Smirk. However, in this game, the Psycho Smirk is absent, and instead he looks slightly angered or remorseful. Crisis Core shows us the scene from Zack's perspective, whereas the two previous times were from Cloud's, and the retcon suddenly makes sense - Cloud is from Nibelheim, so he would see the man who burnt the town to the ground & killed everyone there (Including Cloud's mother) as an unrepentant psycopath.
When Cloud tells the story of Sephiroth's fall from grace in Final Fantasy VII, he omits the presence of Genesis & his pushing Sephiroth into discovering the truth of his origins. Whilst it could simply be that Zack left that out when he told the story to Cloud, it wouldn't make sense for Zack to throw Sephiroth (Someone he considered a friend) under the bus by absolving Genesis of his role in the events; it would make sense, however, for Cloud's anger at Sephiroth over the subsequent destruction of Nibelheim to blur his recollection of the story & pin everything on Sephiroth.
look at Sephiroths' face during the entire game, his skin is clear, his eyes are bright blue/green, then look at the infamouse fire scene, his skin is pale, his eyes have shadows under them, his eyes seem dull and sinister, remember this is practically the only game where we see Sephiroth before his madness for longer than the flashback, showing how disturbing a change Sephiroth had in personality and apparently physical looks.