Final Fantasy VII/Sleeping Forest and the Forgotten Capital
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Aerith has gone to the Forgotten Capital. She has left you her accessory (if any) and all Materia.
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[edit] Excavations at Bone Village
Now, your path leads to the northernmost continent. The Bone Village is a place marked by big dinosaur bones sticking out of the forests there.
Here we find a lot of archaeologists. They say Aerith has gone this way and, incidentally, so has Sephiroth. They also tell you can't get through the Sleeping Forest without the Lunar Harp.
The archeologists are willing to help for a little bit of money, specifically, 500 gil. Ask them to dig for the Lunar Harp, then set up each of the archeologists to their place. (Further hints: The Lunar Harp is somewhere on the top plateau in the Bone Village. It's not terrifyingly difficult to find, just ask them to dig for Lunar Harp and determine its location.) Once all five have been set up, each archeologist will turn to face the place where they think the item seems to be. Move Cloud to the point where their lines of sight meet, then hit the button. After the digs, you can then retrieve the item from the box on the front of the tent.
If you choose "good treasure" you can find a nice gun called Buntline (other diggable treasures). However, you will find it a waste of money after you acquire Buntline as all you will ever get is a potion (worth 50 gil). Thus, it's not worth the 500 gil per search!
By the way, the ladder here seems to only respond to 
, even if you've reasigned another button to be 'action', but only when in the 'digging for stuff' mode.
[edit] Sleeping Forest
There isn't a great deal of stuff to do in the sleeping forest. On the first screen, the Kjata materia is floating through the branches. Grab it.
On the second screen, there's a box containing Water Ring. This is also a great place to train if you want tons of AP.
After the next screen, you make a brief jaunt to the world map, and as you head further north, you find yourself in...
[edit] The Forgotten Capital
There's not much to do here - and you don't need to explore this place much right now, as you'll return here later too. You can find some things here though. Most notably, you can find another Enemy Skill materia on the right side of the town, somewhere in the house with beds.
You need to sleep in this house and in the middle of the night, Cloud wakes up and tells where Aerith is. Specifically, in that prominently placed big house in the middle. Head there. On the top of the spiral, you'll find a Comet materia, which at this point of the game is a very good thing to pick up.
[edit] You can't cry underwater
Head down. After a long stairway, you reach a savepoint and a platform where Aerith seems to be praying.
Now, if you're thinking the whole scene is too calm, it's true. If you think Sephiroth just might be ready to leap from the shadows, I'd say you have a good eye for spotting obviousities. So, this is your chance to get ready for a boss fight. Give some character (Tifa, in my case) an Edincoat (or something) with a lot of summon spells, Heal and Life, and an (this is important) the Water Ring you found earlier.
Cloud heads up alone and then proceeds to almost slice Aerith in half, no matter what you're trying to do with your controller, which may raise some alarms already. (Patience! He's not really a genuine psychopath - you'll soon learn what's really going on!) And then Sephiroth comes and...
...okay, since this is one of the most famous scenes in history of CRPGs, I don't think this is a spoiler. Sephiroth kills Aerith. Dead. I won't tell how this scene goes; it's actually quite touching. The big point is - she's dead and stays that way for all eternity, barring GameShark or the PC savegame editors...
Sephiroth tells a lot of rather odd details on his plans, and Cloud is clearly not ready to take this in this situation. So, it's time to fight yet another weird part of the creature Sephiroth calls his mother...
Jenova-LIFE
Lv: 50, HP: 10000, MP: 300, Weaknesses: Earth, Strong against: Gravity, Poison, Absorbs: Water
If any of the characters has a Water Ring, this fight is trivial, because that means Jenova practically can't do any damage to that character. Big Guard is very useful here, as is White Wind: Water-ringed character stays at relatively high HP, and White Wind goes right through Big Guard's MBarrier part. The big noteworthy thing is that Jenova uses Reflect at one point - after that, don't use normal spells on her. Comet works even after that, though, as do summon spells. Physical attacks are highly valued then. And, as always, remember to heal. Jenova uses Aqualung Enemy Skill too, which can be a handy thing to learn.
Afterwards, you learn, through Jenova's thick accent (less thick on PC version), that Cloud is a puppet. And exactly what that means.
This concludes the first CD. Hunt for the madman Sephiroth continues on Final Fantasy VII CD 2: The Further Adventures of Tifa and C#&%d - Lightning-Materia Boogaloo, included with your copy of Final Fantasy VII. Specifically, you'll then head into the cold. But now, it's time to save and have a deep breath and things like that.
