If it were my decision, I wouldn't go through with this. 16 bit FF games, at their time, were very good for their generation. Hell, they were massively influential, too. But imagine if, after FFVII through XIV, they were released now. Would they be influential? No. Not at all. It's all old-school and perhaps people with nostalgia might like the idea of playing such things, but let's face it, these games just won't cut it in today's gaming environment. If they would, then surely other companies would be churning them out in a big way. The only thing I can think of that it works for would be Pokémon on the DS, and that's largely down to the "CATCH A LOT OF CUTE ANIMALS AND EVOLVE THEM!" rather than an amazing storyline.

To think that somehow SE is suffering from gameplay and storyline purely because of the graphics is naive. There are other games out there that have good storyline, characters, gameplay and graphics. Perhaps it is not so much the problem that SE are struggling to make time for gameplay but rather the time they do spend on said gameplay is not spent to good effect?

Basically, my thought is along the lines of "Graphics and gameplay are two seperate things dealt with by seperate teams. Downsizing graphics does not make a good game, just like cutting back storyline does not lead to amazing graphics."

EDIT: Personally, I would be more in favour of them employing...
1. The use of major fantasy authors to come up with solid plots from start to finish.
2. Thatgamecompany to come up with more/better minigames.
3. A new PR team to focus on communication with fans and what they want.