In 2005 at the Sony E3 annual press conference, Square Enix showed a Technical Demo for the PS3 depicting the opening sequence to the original Final Fantasy VII. (As seen below) This made a massive rumor circulate that they were re-making Final Fantasy VII for the PS3. If anyone remembers, the same thing happened when they did a tech demo for the original Playstation, with Final Fantasy VI.
Although rumors remained for a time, Square-Enix has made an official statement that there are currently no plans of a remake of Final Fantasy VII for the PS3.
Then the rumors began again with the release of Advent Children, when the scenes directly from the game were viewed. People thought these were possible completed portions of the remake itself.
The rumors flew a third time with Square Enix' exhibition of new FMV artworks during the Final Fantasy VII 10th Anniversary event in Japan. The artworks depict the characters in their FFVII costumes such as they would appear in a PS3 remake, sparking rumors that the game may be in development. These CG artworks were printed on their new canned Potion beverages. Kazuo Hirai, the president of Sony Computer Entertainment Japan, added fuel to the now blazing fire, by sticking a small note in the exhibition saying "Congratulations for the ten fantastic years! The best is yet to come".
Some time this last year, a petition for the remake was signed by over 200,000 people, and was given to Square-Enix. They responded with a small note to the fans:
"Thank you for contacting SQUARE ENIX Customer Support,

We hope this letter answers your questions.

Our parent company, SQUARE ENIX of Japan, has no current plans to create a sequel or remake to that particular title at this time. This is not to say that it will never happen, it’s just that their development teams are currently focusing on numerous other projects.

We hope this information has been of assistance.
Thanks,
Neil- SQUARE ENIX Customer Support"

Basically they know now, the want for this title. It is true that there are other projects going on right now. I know of three more Kingdom Heart games, as well as the new Crystal Chronicles game. There is also the highly anticipated Fabulous Nova Crystallis: Final Fantasy XIII project as well. It is not that they have totally said no, just that right now, there is no time. And it must also be noted, that most of those involved with this compilation, or Final Fantasy VII, are currently working on Final Fantasy XIII.
Recently in an interview for Final Fantasy XIII, it was said they would like to continue Cloud's story, but it is not something that is going to happen right now. Perhaps maybe after the XIII series is complete?

What do you think?