Kefka is still one of my favorite villains of all time. He is the best personification of nihilistic insanity I've ever seen, and it did interesting things for the story.
He was essentially written as a force of nature, with almost no development beyond surface personality. This cleared the way for the game to focus completely on the protagonists, who all had deep personal issues to work out. So what happened was all this saving the world business was turned into a heroic group therapy session. It's pretty well divided too, if you think about it, how you learn about everybody's problems in the first half of the game, the apocalypse actually happens, and then the process of rebuilding a broken world inspires everyone to resolve their issues together.
This is the same formula that's made the zombie genre so damn popular. The story isn't about the zombies or the apocalypse. That's just the setting. The actual story is about the survivor's personal issues and group dynamics.
I think the writers for FF6 came up with this awesome cast of protagonists, who are all impressively non-cliched even today, and then said "Well shit. There's so much protagonist backstory to work through, there's hardly any room for main villain conflict. Fuck it! We don't need some complex partially-sympathetic villain plot. Let's just throw in a classic unquestionably pure evil megalomaniac to fight and be done with it... and we might as well make him the most memorably, gleefully insane megalomaniac ever!"
I also interpret Kefka's image a little differently from most people. Most look at him as your standard insane jester cliche. I don't think he's actually meant to be seen that way. I think he just wants attention. He sees himself as the ultimate royal being of all the universe, and he expresses his self-image to others by dressing in the biggest, brightest clothing possible. He overdoes it to the point of looking like an absurd caricature of royalty -- a clown.
Damn, I really need to make this cosplay actually happen. Gencon 2013. I will be Kefka.