I was thinking....after all the characters who already have battle models are implemented (presuming that you are going to try to do every last one), perhaps we may be able to make ones for the npcs by using one of the existing battle model conversions as a template, and changing the colors of stuff like clothes, hair, modifiying bone structures, polys/verts, etc. to make a suitable imitation of them, while still staying within the limits of what FF7 can support of in a model?
Ok, I'll admit that sounds like a lot of individual models to do. But take a step back and think about this for a second: from what I can tell, there are only a few "generic" looking npc models that are seen in most towns in large numbers (I.E., like 4 or 5 models are responsible for the majority of the game's npc population), and therefore modifiying a few existing battle model conversions to cover those, er, "classes" of npc could cover, like 78% of the npc's in the game.
