the producer (i won't bother spelling his name) said it'd take place in a city....a city that's hidden in the logo of FFVII AC (if you look real close at Meteor, you'll see the shape of Midgar in it)

but kalm IS close to midgar, and plus, the story is undoubtedly somewhere near the temple of the Ancients....Cloud and Vince are there no?

well there MAY be scenes in kalm

however it looks like it's in Midgar right next to that monument of Meteor