Cloud has a couple of lines that imply this is a post-City-of-the-Ancients universe, so to speak, but I feel they can't have excluded her solely so Cloud had a reason to pursue Sephiroth, especially given that Sephiroth doesn't actually appear in the story. Maybe you're right; maybe they didn't want the cameo cast to feel too VII-heavy.

Balthier and Fran would have been great. I'm so sad (and confused) that there wasn't a single XII character. Fingers crossed for them in Kingdom Hearts.