Yes, Cloud and Sephiroth are in Dissidia: Final Fantasy. Anyone who knows anything about Final Fantasy figured out the two characters would be Dissidia way before Square Enix officially announced them. But what do they do in Dissidia? This trailer of gives us a pretty good idea.
When Cloud goes into EX Mode he uses the Omnislash limit break. Sephiroth can counter by going into EX mode and casting Supernova, the powerful spell he uses when he is the last boss in Final Fantasy VII. Unfortunately, he doesn’t transform into the maniac angel from the last fight where his legs are replaced with wings. In the clip it looks like the two limit breaks can be charged by tapping the circle button too, but this could just be for show since other Dissidia characters don’t use a similar system.
Images courtesy of Square Enix.