I don't think that FFVII was ever actually confirmed to be going to the N64 to be honest. They did produce a 3D tech demo of sorts using FFVI characters which ran on the unfinished N64 hardware at the time, but I don't think that really qualifies as intent to make FFVII for the system as much as making a tech demo for the sake of making a tech demo. Maybe at one point they thought about it, but I doubt any actual development happened for the N64.

The reason they went with Playstation was a combination of cheaper discs, cheaper licensing fees from Sony, more freedom to do whatever they wanted, and more storage space. If they'd always planned on doing things like those pre-rendered cut scenes, they never could have released the game on the N64. I remember some of their print ads at the time saying if the game was on a cartridge it would cost $1000, and I really doubt that's an exaggeration to be honest. Cartridge memory was extremely expensive, and even by the end of the N64's time they weren't even close to having as much space as one CD, let alone three. And to be honest, I'm not 100% convinced they could have fit the game without the cut scenes on the cartridges available at the time. Cartridges had a lot more storage space by the time the N64 was on its way out, but when FFVII came out they were woefully small.