This one kinda gets away with it because it focuses on a fairly minor character that most players probably never even learned about on their first playthrough of FF7. What it does well is showing what characters (the villains in particular) of FF7 were like before they went off the deep end (Sephiroth, Shinro Corp.), or showing just how unnecessarily cruel and removed from humanity others were (Hojo). Zack's story is also just good on its own, starting with him making friends and learning from his mentors, moving to him surpassing his mentors and becoming independent from his friends, then to him becoming a mentor and friend to others, and ending with him making a sacrifice so others could take his place. The story felt natural and it could easily stand on its own, but it also functioned well as a precursor to the events in the game it's a prequel to.
Basically it takes the stuff that we know because the first game told us, but this time it shows us from the perspective of someone who was there instead of telling us from the perspective of someone who wasn't.
Fuck Genesis though. He drags down every scene he appears in.