I was always under the believe that they began developing FFVII for some attachment system for SNES that involved discs instead of cartridges, and but Nintendo dumped that project becuase well....thier dumb. So then with an already half finished FFVII, they switched to Sony who they would be able to actually convert thier work onto a few discs, rather then scrapping it all and trying to make something to fit on a single cartridge.

That's just what I've heard though. I'll wait for Kishi to set it all straight in a most comical way most likely.