1) Avalanche vs. Shinra in Midgar,
2) Sephiroth tries to summon meteor and successfully does so with Cloud's help,
3) Shinra + Avalanche tries to stop the Weapons/Meteor.
All of these have very memorable, fitting, and thematically coherent introduction and ending sequences in the original game as well.
Ending the second part on the Aerith death doesn't make any sense, because it merely sets the stage for a resolution to the second story. It would be like ending the first game on the Sector 7 plate coming down, and would feel like a cheap and unsatisfying episodic cliffhanger. Starting the third game with the insanely climactic resolution to that would be even weirder.
In my opinion, the second game should start with the Nibelheim flashback which sets up Cloud's shaky memories and Sephiroth's motivations, have stakes be set by Aerith's death mid-game (the way the plate coming down did), and end with catching up to Sephiroth's final destination at Northern Crater, dramatically revealing that you were following/manipulated by Jenova this entire time, the Zack mind-**** sequence answering a bunch of questions regarding Cloud's past while organically introducing even more intriguing mysteries about it, then finally, Sephiroth successfully summoning meteor, Cloud being abandoned in the lifestream, and the Weapons being unleashed on the world. That would be a note-perfect way to end the installment, IMO (basically the Empire Strikes Back moment, where the villains win and everything is sent into chaos). It would also be an excellent opportunity to end on Tifa's flashback which cleverly connects right back to the beginning of the first game, immediately before the first bombing mission.
There's absolutely enough material to complete a third and final game with the remaining material. My proposal would be that since it's almost a certainty that the second game will have to feature all of the remaining non-optional characters (they all feature well before the Aerith death), Yuffie and Vincent's stories/characters should be saved until the third game (although Yuffie could reasonably be introduced and used the same way Red XIII is in the first game).
In my opinion, the third game should start with them escaping execution and obtaining the Highwind, and then involve story beats such as finding Cloud, elaborate set pieces involving the Weapons, finding Huge Materia/Shinra's attempts to stop the Meteor, significantly more extensively finding out about Vincent/Lucrecia/Hojo's past (there's a ton of really cool and meaty material in there that the original game gets through in like 30 seconds), Cloud finding himself in the lifestream and conclusively answering every mystery about himself and his past, Zack's past/death being fully revealed and elaborated on (I think it would also make sense to pepper his backstory throughout the game, and maybe even have it be the actual intro), Bugenhagen helping them understand how Holy works (setting up the primary theme of the game about whether or not humans are actually good for the planet) and dying, finishing off Shinra, and then finally, the Northern Crater dungeon, Jenova/Sephiroth, and the Meteor ending. I also imagine that there MUST be a clever and elegant way to tie in Huge Materia with Wutai (since their primary conflict is all about Materia) as an opportunity to slide in Yuffie's sidequest and flesh out Wutai's role in all of this.
I think that would work perfectly, personally. The concern isn't whether or not there's enough material, the concern is whether or not it's TOO MUCH material for them to be able to do justice to, considering how both of those involve so many more plot points than the first game. At least there would be less of an excuse for them to add unnecessary padding.
