This is so painful and so great. The realisation that Seifer had forgotten he'd told Squall about his dream hit hard; the realisation that they'd both forgotten their friendship hit even harder. The sparring scene is agonising, Seifer being friendly and Squall taking it badly because he's forgotten that they're friends.

Honestly, I think you could post this as a complete fic! Maybe the roadblock is that you're trying to expand it when it doesn't really need to be expanded.