I believe that Zack was killed by Sephiroth, as indicated by the black feather shown during the mid-credits scenes featuring the Disney characters. Assuming that Zack and Cloud were friends in some way, that would explain part of Cloud’s hatred for Sephiroth (aside from what’s already been established).
Can’t speak to Hades’ plans, though, I believe he wanted Terra to kill Hercules and for him to have to succumb to darkness to do it (hence why he had him fight an empowered Zack). Just my theory, though.