I'd say they certainly do think that far (original ff7 team, certainly not the modern!), or you'd see out of control scenes in the FMV and outside of battle (or, at the least, no explanation for the more unrealistic cut-scenes). Battle mechanics work completely different to FMV/cutscenes in FF7 and a lot of games. And that goes for a lot of RPGs.
No you wouldn't, because as you should be perfectly aware of, animating that kind of stuff back in the early days of the PSX era, was extremely challenging - if not outright impossible.
Even the FMVs of fighting games like Tekken at the time used actual person on person action in their FMVs very sparingly for the same reason.
In fact, as a person who knows how this works - I'd argue that it would take more time, resources, and skill to make convincing animations in the FMVs than in the battle sequences - which should be apparant to laypeople as well simply by looking at the difference of quality in the animation of movement between FF7's fight scenes and the FMVs (hint - the latter is much less fluid, staccato and just bad)
Also, I am not denying that the mechanics work differently - Naturally Cloud and Co are not actually standing in place waiting for ATB gauges to fill up, only to attack once, and then go back into line. It's an abstraction - however, to think that it's only just an abstraction, and that there is no overlap between what happens in battles the rest of the story is IMO patently absurd.
I think the player is supposed to be able to extrapolate from the battles what is actually going on once you remove the floating numbers, the ATBs etc. And as I already said, which you didn't address in your apply, there are just as many discrepancies waiting to happen if you decide to make this 100% dedication to the field fight scenes, and nothing else. Since you didn't actually address those points I see little point in addressing your list - but I will make an exception this time -
Tifa almost dead from 1 slash
Tifa was slashed by Sephiroth wielding Masamune, which should have killed her outright, if not split her in half - especially granted that the blade travels directly through her body. However, again, there is probably a level of abstraction and technical limitation underlying this scene as well.
However, taken for what it is, and nothing more, his scene makes no sense period - again going to show that action sequences and the scenomatography of FF7 is shoddy at times.
Tifa coma 7 days from a fall
Corneo dead from fall (lots of falling)
Dyne dead from fall
Cloud knocked out from fall
You put all these falls in the same list and didn't pick up on the problems it causes for the setting of the game in how inconsistent they show the rules of the game to be?
Tifa fell as a child, and from a height so large a coma is warranted, if it should have killed her outright compared to what apparently kills other characters in the game.
Cloud survives as an adult who's been tinkered with extensively and has his fall broken by a magical flower bed (yet his inner voice said he would have gotten off with a pair of skinned knees back then, which makes even less sense) - what's Tifa's excuse?
As for Dyne, nobody knows how deep that pit went, but granted the logic behind how certain characters (even children) in the FF7 world can survive falls from mountain-tops, maybe we shouldn't even assume Dyne to be dead, just to be consistent? No, of course we shouldn't - but this would make another good example of FF7's selective physics at work.
Rufus dead from explosion (retcons don't count)
Pres Shinra dead from stab
Corneo dead from fall (lots of falling)
Zeng seriously injured by slash
Zax dead by firing squad
Heidegger and Scarlet killed in machine explosion (note that this is shown in a cutscene)
The rest becomes pretty inconsequential at this point -
Falling deaths VS survival falls in FF7 are completely inconsistent, as are melee weapon damage.
If anything, the most consistently dangerous attacks in cut-scenes seem to be gunfire, which makes it even harder to imagine how people like Cloud are supposedly fighting people with machine-guns without a certain level of over-the-top swordsmanship.
And in battle you see: Cloud shot repeatedly by Rufus, bitten by dogs, dolphins from Tifa's feet,
houses that come alive... and so on. Hell, Rufus "survives" your repeated sword slashes in battle and then rides off on a chopper. Clearly, the writers mean for you to interpret that as you fought him but didn't literally hit him in the face with a sword. But that's how games work. You can't plant that logic into a story.
And as I clearly said - there is a blurred line - I did not sat that everything that happens in battles should be taken literally, which would be a very uncharitable reading of my post, if not an outright straw-man, making that point moot.
The point here is that both the plot, and the battles, are inconsistent in their own ways and with each other - but they also tie together when it's convenient for the story-telling, such as in the Nibelheim flash-back and the final encounter between Cloud and Sephiroth in life-stream, which I take to mean that the split between the two is not entirely clear nor even consistent.
How do you think, for instance, the Highwind fight against Ultima Weapon played out? You really think that the limited amount of action outside of the battle-system and the very specific and selective use of battle scenes for dramatic effect throughout the plot is all done as the optimal choice on part of the devs, and not because it was a pain to animated anything, much less battle sequences, with the field models (so much so in fact, that the game keeps on recycling the same mannerism to the characters over and over again)?
There is most definitely a distinction. I'd say it was good writing and awareness, but it could equally have been a limit of the tech, as Covarr thinks. I am not convinced of that.
It doesn't have to be just the one or just the other. What I am trying to point out here, is that there can be cases of both.
They quite obviously chose certain scenes - after all, the reactor showdown between Cloud and Sephiroth, or Zack and Sephiroth could just as easily have been rendered in the battle engine for dramatic effect like the final showdown, so they obviously went with the field models for a reason.
I am simply saying that the large stylistic difference between the battles and the field scenes, combined with selective use of
very carefully picked battle scenes at other times, technical limitations, the nature of the Gaia world with its mix of real and fantasy, and the scope of the battles the story throws at Cloud and Co, seems to suggest that we ought to extrapolate from at least some of what is going on in the battles and imagine it as, at least, partly reflective of what the devs intended to have going on in general if they could have rendered the entire thing exactly the way they envisioned it.
I certainly don't think the writers or devs intended people like Cloud and Sephiroth to be limited to human feats of speed and strength, especially when you consider the blades they are wielding, and the way in which they wield them is already physically impossible.
In fact, with the size and length of Buster Sword, wielding it would be physically impossible even for a super-strong human being, since a swing of it would generate so much momentum it would literally launch the wielder off into the air after it, unless he was nailed to the ground, or weighed a ton or so.
Some things clearly weren't all that well-thought out period. I don't think we should credit the authors, nor the devs of FF7 too much for their work - for while it's stellar in many departments, it also has issues, like all other narratives and works of fiction ever made.