Kefka from FF 3 is by far the best villian from any video game ever. Sepheroth was too generic for my tastes, just the typical, underdeveloped silent villian, i couldn't hate him because he was too cool.
Another thing I didn't like about him or ff7 is how for like teh whole middle of the game, he wasn't even an issue, they just forgot about him completely, and they tried to redeem this simply by having him kill aeris at some random point to get easy hate for him. Plus he was way too easy to beat. Once you got knights of the round and Omnislash, you could kill him in like 3 hits.
Kefka all the way, he was utterly evil and completely diabolical. Hands down teh best villian ever to grace a console.
Now that i think about it, I guess kefka is my favorite character, not just villian, from any FF game.