It bothers me that Rufus isn't sure whch opton would be worse between him suffering a delusion, and Cloud turning into an insane madman, makes me think he's letting selfish impulses override his brain, but I like it that he can see Cloud as more dangerous than Sephiroth.
I think it's pretty clear that Rufus knows right off the bat which option is unquestionably worse. That doesn't mean he has to embrace that knowledge with enthusiasm. So in a way, yes, perhaps he's being a bit selfish. After all, who likes that the idea of going insane? And I'm sure Rufus finds it particularly abhorrent, the poor guy.
Unfortunately, the easy option (that Rufus himself was delusional) is rapidly quashed by Tasha's report. ^_-