The part of the story you're questioning about is kinda ambiguous. Many fans will interpret that part of the story differently. There are several main schools of thought.
One, for instance, is that Cloud subdued his own memories and took on the memories of Zack as a psychological defense mechanism, something similar to delusions of grandeur or the like.
I'm sure some of the people on this board can pipe in with their various interpretations, would be fun to see all of this stuff dredged up again.
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