FF7's second disc tends to crap out in terms of story because the writers were forced to keep upping the ante of plot drama and eventually hit the wall trying.
The first disc is paced pretty well in this regard, setting up the threat to the world and continues to build in tempo till the emotional climax.
The second disc attempts to keep doing this, but after Meteor enters the plot it starts running out of gas because the writers weren't sure how to keep increasing the tempo of the plot without keeping it plausible, hence that weird lull after the prison break where you get the airship, and while the Huge Materia quests and getting Cloud some therapy for his issues were fairly well done, the curiously apathetic followup to you pissing off the Shinra Company (whose reaction to your meddling is entirely reactive and not proactive) tend to kneecap the plot tension.
This does however let the player indulge in a lot of side quests during the plot lulls, and to be fair it makes more sense to do so then as opposed to Disc 3, which makes it pretty clear the planet is gonna be doomed in a few days if you just sit with your thumb up your ass. Disc 2 kept the date of impending Armageddon a bit hazy for this very reason, but it's hard to keep being emotionally invested in it by the same token.
It also doesn't help the final boss literally sits on his ass since achieving his goals in full by the midpoint of Disc 2, whereas their actions kept the plot moving along nicely until that point.
