You might want to save in the bedroom before starting this quest. When you are done, go up the ladder in the top left side of the area and then up the stairs. Talk to the orange guy up here and pick the middle option to start a mini game, or the bottom option to learn more. In the mini game you need to set units to attack oncoming enemies, it doesn’t really matter if they reach the reactor, because if they do, your party just has to fight the commander which is easier than the mini game.
So if you want to have money, as you have to pay for the units you use, just put down a few units and wait until they attack the shed and beat the commander that way. Watch the FMV then go out the door and pick up the Summon Phoenix materia and look at the sweet ickly baby condor, who will then fly off. Go back inside and talk to the man praying at the table to get the Huge Materia. You’ll then learn there’s another Huge Materia in Junon, but first go back to Mideel and go and talk to Tifa. The screen will shake, so go outside and you’ll see Ultima WEAPON flying about. After Cid shouts at it, it will attack you…
This boss only has a few attacks (Quake 2 and Ultima Beam) and is pretty easy to beat, use Barrier as he deal out quite a bit of damage, you can also use Haste if you like, and then just use powerful summons and physical attacks and eventually he’ll fly off.
The town will then fall about and as Cloud and Tifa try to escape, they will fall into the Lifestream.