@Sessho on more research, I find out that equipping Destruct materia on Cloud's armor, linked with Added Effect materia, will make Cloud immune to instant death. That will make Meido Zangetsuha useless.
So round 1 with speed equalized, it's basically Cloud attacks 1 times, Inuyasha attacks 1 times etc until someone dies.
At this scenario, with destruct materia + added effect, Cloud can ignore Meido Zangetsuha.
He will just use:
KoTR - HP Absorb
Counter attack - Mime
That way, Cloud just needs to summon KoTR once and goes afk. Everytime Inuyasha counters with his move, Cloud will counter it again by mime-ing KoTR over and over again, that will also heal Cloud to 100% HP everytime with HP absorb effect.
Just like the battle against Ruby Weapon.