Re: Not to beat a deceased equine into the ground . . . Fantasy uses the word "demon" with little understanding. The original Greek... I, also, got the impression Chaos is really an entity with a job to do. A crucial job.
*happy clap* Ah, classical usage! Thank you! Too many people presume "demon" = "Judeo-Christian devil et al" and totally lose sight of the older, less politically-driven meaning. I think the world lost a lot when the western priest-kings changed the meanings of such words to suit their dogma.
How Hojo trapped such a powerful being and what he thought it was, we may never know.
From the way everything in the canon reads, it was actually Lucrecia who "caught" Chaos, using research she had done with Vincent's father. It's said in DoC that Hojo wasn't even really sure himself, until he saw Vincent transform (during the original FFVII).
Here's a bit of scriptage for your entertainment on the subject of "what Hojo thought" -- he's a right scary little bastard, he is... o_O;;
Hojo: You know, when I first read it, I thought that woman's thesis was utter nonsense. I couldn't believe some fabled beast from legend past had anything to do with your survival. However, three years ago when you transformed into Chaos right before my eyes, I must say I was shocked. Who would have thought her theory was actually valid? And so I began thinking. If Chaos exists, then so too must Omega. And if you could become one, then maybe I could become the other to traverse the cosmos in a blaze of glory!
Or check into a psycho ward, whichever comes first, huh?
Gotta love them crazy scientists: without them we wouldn't have our angsty genetically modified bishounen, eh? ~_^