Yeah, usually when this happens it's the 7h install that's off because it isn't changing the kernel correctly. Only real sure way is to start again.
http://forums.qhimm.com/index.php?topic=15520.0Steps are:
Wipe out the game; keep any save folders you need though. Delete the game files/uninstall etc. There is a recommendation for cleaning the registry but I typically don't do this.
Install the game (Steam preferably, but 1998 max install from Disc should work too); install it to a non-protected folder that isn't Program Folders. Steam tends to install games to this folder by default which can cause security read/write problems with 3rd party tools like 7h.
When installed, run the Game Converter from the 7h tutorial thread. If you've ran GC in the past, it'll give uninstall as an option (confirm this by pressing U, then run the tool again). It'll ask for your FF7 directory if it doesn't auto-detect it, so type it in manually with the "" included.
You can install the game converted version to the same directory that your current FF7 sits in; this tends to be cleaner than having two separate directories as you can still run 1998/Steam independently of 7h; they don't interfere with each other.
The GC step must be completed in order for 7h to function properly. After it's done, make sure that 7h itself is pointing at the correct files/.exes (should be ff7.exe, and not ff7_en.exe which is the Steam exe).
Now you should test 7h before downloading any heavy-duty mods. Best way is to download a gameplay mod like NT and run the game. Typically, it's the Kernel that won't be patched if the install process didn't work properly. Drop a save file into your save folder (can be from vanilla, doesn't matter) and check the Bronze Bangle. If it has 3 Materia slots, then the Kernel patched successfully (or can check other equipment, if it's different from vanilla then it's patched).
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If all else fails, NT can be played without 7h by using the regular installer it has. This patches over the game files. Problem with this is that other mods can't be combined into it as easily.