You mean the incident? (Not the fake town Shinra sets up after the incident).
Never heard that it was fake. It has been told from 3 different perspectives (in 4 mediums) and there are different accounts but too many similarities for it to be fake.
1. OG: Cloud’s fukked up memory is what happened to Zack, his real memory is:
- go to Nibelheim
- Sephiroth finds out about the experimentations/Jenova
- goes insane and kills everyone
- one shots Zack, Cloud stabs Sephiroth, Sephiroth stabs Cloud who then yeets him into the lifestream
2. Crisis Core: everything the same except GENESIS is the one who first tells Sephiroth about the experimentations and the Zack/Sephiroth fight is much longer.
3. Before Crisis: Turks perspective. Only difference is that they claim Sephiroth jumped into the lifestream (my theory is they do this to write Cloud out of the story, perhaps even on Hojo's orders).
4. Last Order: in line with Crisis Core.
The only ambiguity seems to be how much of a fight Zack put up, and perhaps why Cloud was able to overpower Sephiroth and throw him into the lifestream.