Unlike in most of the other Final Fantasy games, actual character levels seem to take a back seat to other things, like materia and limit breaks. If you fight every battle you come across, you should never have to run around in circles just to gain extra levels (unless you want to). You might have to run in circles to get materia and limit levels, but FF7 is pretty generous when it comes to experience points. Nonetheless, it might be a good idea to keep track of everybody's current level, and rotate your characters frequently. While those not in the active party get half the experience that Cloud and his two current companions get for each battle, it's still a good idea to try and keep everybody generally on the same level (except Cloud, of course, since he'll always be roughly 5 levels ahead of everyone else). Besides, you'll be required to use every character--except Vincent and Yuffie--at least once. Might as well have them be able to hold their own, right?