That's complete BS. Rinoa's boobs are a 100% Grade-A natural. Straight up.
Damn, and I thought they were a collection of polygons.

Replay that part in the game and pay attention to what Irvine says. He's rather subtle about it, and Squall doesn't actually 'say' anything, he just does that whole 'arm swing' action that he does when he is pissed. Square was just being cheeky, but made it hard to notice in order to not mess up the game's story too badly.