FF7 can in fact have semi transparency. I have personally imported a model of the Brotherhood from FFX, with transparent blade. The method to do it was a bit annoying. Have to set transparency in gimp and in blender before converting the files back to p. then play around in kimera a bit and youll eventually get a decent result. The same can be done for battles, which I will be doing once I get around to fixing/enhancing my current work.
That doesn't count for the backgrounds. There are layers which simply have no transparency and only opaque or not opaque are possible. The effect layers can be transparent, BUT only if they have no changing in the transparency - the game actually reduce the brightness of a pallet, else it can't be displayed due to the bigger pallet of the upscaled texture. Though, Aali's driver has generally a problem to replace these textures correctly, even if you replace them with the default resolution.