Again, from the FAQ - question 5:
➣ For whatever reasons, I need to start over with a fresh install.If you have modded your game folder before, particularly with installers like Bootleg Configurator, The Reunion, etc., then the registry keys aren't cleaned properly to work with 7th Heaven.
1. Uninstall Final Fantasy VII.
2. Delete all the junk files in the game directory.
2. Run this to clean FF7 registry keys:
DOWNLOAD3. Run CCleaner (optional but free):
DOWNLOAD4. Install Final Fantasy VII and begin at
STEP 1 again.
With CCleaner, you want to use the Registry cleaner. Then, when you install again with Steam, be sure to tell it to install to C:\Games\FF7. Right now, you must have Steam installing to the Program Files (x86), which the GC identifies as a problem and tries to copy the game folder over to C:\Games\FF7. However, the copy process doesn't seem to be working for you.