hansschmucker: Actually I'd love to see it, but the PSX version, not the horrible PC version.
About the videos. The PC and PSX versions use different formats... the PC version uses an absolutely horrible Indeo video format that is just unbearable to watch. The PSX version uses an even simpler scheme, but amazingly manages to produce much better quality: All videos are saved as a stream of JPEG images without any interframe compression.
The space requirements are mostly because of these inefficient formats which require at least 1mbit/s for even remotely watchable quality in low res videos. Using a modern compression like h264, the same quality can be achieved using roughly a quarter of that bitrate.
About the game itself: FF7 is as much a JRPG as it is an interactive movie. The focus was on creating a good scenario during a time when most other developers were still trying to figure out how they could blow up their arcade games so that they could claim to make full use of the new CD media.
Today FF7 may not be very remarkable anymore, but back then it simply blew us away with a level of story and character development that we hadn't seen before. It basically created the modern JRPG genre.
The fight system itself is simplistic and not really meant to challenge you. FF7 uses it more to fill the empty gaps between two cutscenes.
It's really all about the scenario, about making the world that the game plays in believable... which is also why FF8 is actually my favourite part: The world is much easier to understand for a European guy than the sometimes bizarre world of FF7.