Wait...what exactly makes the main party 'morally grey' if they are knowingly and intentionally bombing innocent people again? In 97 as a kid you didn't really think about it much and while there is an offhand acknowledgment, it isn't something the party spends time on. If anything, in a world where terrorism was front and center in a lot of people's thoughts the past decades it would be monumentally stupid to keep this part as it was and have them casually ignore it. If people are gonna hype up this cast as the most awesomest jrpg characters ever I personally have no problem with them being actually good people at heart and not 'morally grey' mass murderers, thanks
You really didn't think this through.
Avalanche are still terrorists.
Avalanche are now being presented as the ones who didn't cause the wholesale loss of life. It was the Shinra president all along.
Square enix is using the Shinra president actions to casually ignore Avalanche's ethics.
Make no mistake about it. Square Enix will use this scene later on to continue presenting Avalanche members as good guys without judgement.