That soon? We don't know when that flashback occured.
This appears to be on some street next to a concrete pillar. And it's unclear if this is where Cloud has the flashback, or if this is where the flashback itself took place.
Although keep in mind that this game is said to have extensive new content taking place in Midgar, that will flesh out characters like Biggs, Wedge, and Jesse, and let you visit all the different Sectors. So it would not necessarily be out of place to reveal a little bit more about Sephiroth at that point in the game, if we're going to spend that much more time in it.
You'ren looking at the point I'm trying to make. The point is that Sephiroth, for the sake of setting of the stage and putting importance of Sephiroth's/Clouds relationship into context - shouldn't be appearing in the game so soon regardless if it's the same scene or not. Sephiroth doesn't appear until you're a quarter through the game on the Junon Boat.
Because at that time, the stage had been set by the discovery of headless Jenova at Shinra HQ and Sephiroth's sword moments later. Which gave leeway to the importance of Clouds memory when they fill in the rest of the party (and the gamer) why Sephiroth being STILL alive is a big deal - despite Tifa and Cloud believing he had died years earlier.
THAT'S the point I'm trying to make...