EDIT: Problem solved!!
I solved it by not playing it through my TV with a HDMI cable and instead just stuck to my monitor.
I am running windows 7 x64 bit here are my specs:
intel core i3 @ 3.07 GHz
4gb RAM
Graphics card: ATI Raedon HD 5450
Ok so here is the steps i have taken:
Uninstall FF7
Install FF7 disabling all options and selecting Maximum install
Install the 1.02 Patch
Install Aali's OpenGL Driver 0.7.11b
Run ff7config.exe as administrator
Set the graphics driver to 'custom'
Change the openGL settings to these:
window_size_x = 1280
window_size_y = 720
preserve_aspect = yes
fullscreen = no
Run ff7.exe as administrator
And here is what happens, The Eidos plays correctly, then here is my menu with no New Game or Continue:
I can however still move an invisible cursor and select new game. The opening cutscene plays this happens:
And then this is the first battle:
any help is appreciated, im not all that good with computers....