The chocobo patch only fixes the chocobo race....nothing else and only for WinXP, Win98SE doesn't have problems with that crash...and I believe it only works on an untampered FF7.exe file.....such as the one that comes with the game or the TNT version.
First
I suggest a clean reinstalling of the game.....
Then grab the FF7config.exe from the TNT patch.
Try playing in software mode first....if it works, then tackle Hardware mode.
For hardware mode you just need to select it in the pulldown menu, and don't check any boxes.....and don't use the FF7.exe from the TNTpatch, only the FF7config.exe.
The only time you would need to use the FF7.exe from the TNTpatch is when you use the Rivatuner method.....if you use that method and only when using that method, you use the FF7.exe from the TNTpatch. You also check the nvidia check boxes when using the Rivatuner method.
As for your crashes.....I'm not surpised. This game is near impossible running on today's machines. Try going to dxdiag, and put your sound accelertion to basic. Just type dxdiag in the run menu of windows and go to the sound tab, you'll see it. It's instant, you don't need to reboot for it to take effect. You also want to put your computer into Win98 mode.....I think you do it through your shortcut, but not sure....I'm still using Win98SE.