I recognize that...! It's the FMV with all them weapons jumping out, isn't it? My cousin had the same problem, and he used Win98 (no XP-patch). I never had the problem myself (but then again, I never used pirated FF7 CDs ). I believe your best bet is finding a friendly soul who can play your savegame until the next save-point. You miss a small cutscene with Tifa, but it's nothing I'd shoot myself for missing. You'll also miss Meteor's introduction, but that can be viewed off the CD.

Well? Any friendly soul with FF7 PC? (I've had quite limited success in getting it to work on this rig, and I'm too lazy to fire up Ye Olde Faithful.)