My results:
It works. Mostly.
I installed it, installed the 1.02 patch, and disabled the "Truemotion" codec in FFDshow, and then I was able to run the game, no problem. No need to "Run as Administrator." It can't play videos, though, I bet this would be fixed if I could install the Truemotion codec in the upside down movie patch, but I can't install that, it seems that the installer is 16-bit and I am running 64-bit Vista. This means I can resume old games and get stuck when I get to a cutscene, but not start a new game. (I got past the video that plays when you open the game by just pressing numpad Enter.)
Note - Without Truemotion support disabled in FFDShow, I get behavior identical to that reported by James Pond.
So, if someone could look into what would be necessary to distribute the "upside down movie patch" without the installer or with a different installer, that'd be cool. Maybe I'll do it. I bet it's just copying and registering a .ax file. (I'd be way happier to do it if VMware would hurry up and release something that works on Vista and isn't so dang slow.)
Also, I haven't confirmed this but I believe that you will definitely need to install the Chocobo patch if you are playing FF7 on any version of Windows that uses the NT kernel.
[Edit]
I should also report that FF8 works with no problems at all except the NVIDIA black-box problem that some people have in XP with later NVIDIA cards.