Sephiroth isn't even that popular of a character though. He was the main villain of one final fantasy game. Literally nobody ever talked about him in speculation.
FF7 is big game though, and Sephiroth's Design is very cool looking. His actual character is debatable (Some people think he's Awesome, some think he's dumb, and different interpretation between games vary opinion) but There's no need to lie about him being Popular in General
Sephiroth was niche in Speculation, because between the fact that unique secondary 3rd parties weren't a thing at the time, the whole thing about Square being stingy, especially as FF7 was concerned, and to be honest being overshadowed by Sora and Geno in terms of talks, than yes
Still there were some people that have mentioned him before. We have the Sephiroth Speculation thread, and Rogersbase was right on the money for another FF7 Character, specifically Sephiroth. Even I mentioned him a Few times
I don't think it was that people secretly Actively wanted him in, but I think it was a character that people would be cool with, or Love anyway in spite of that
Eggman is an iconic villain too. Would he become everyone's secret most wanted if he was included? What about Glados from portal,, also an iconic villain. What about Vaas from Far Cry or Handsome Jack?
Also how would he be a pipedream? Nobody ever talked about him. You're still telling me that everyone somehow secretly wanted him.
I don't know about the other Characters, but after Sephiroth, Eggman did start to become one of the most wanted characters in Speculation. The request for another Sonic character has been strong since Brawl (even had some place in Melee, when Sonic wasn't even in the game), but Eggman was a more niche request compared to Tails, Shadow, & Knuckles.
With Sephiroth showing how Unique secondary 3rd party characters can be, Eggman probably being more popular these days than back then as a character, being another Villain, and that Shadow & Knuckles are considered Kill, Eggman has become one of the Highlights of Speculation.