LOL I was just joking (couldn't you tell). You cannot under ANY circumstance backwards engineer or modify copyrighted items AT ALL so yeah its illegal.
EDIT sorry for this post being off topic. Oh and Ammo I think one of your pic's is broken.
Awww, sorry.
Well, no, considering the context, I wasn't sure at all.
Really? Which one? I haven't touched them, but I suppose it's possible the host has messed up. Although a temporary connection error is probably even more likely.
So what then of all the Gmod models people use? Models ripped from countless games, yet available for anyone to download and do with as they please. I realize that is a different scenario entirely, but there have been no repercussions there that I'm aware of. The point is, that taking models from the exact same FF7 game and applying it in-game should definitely not be breaking a rule here.
They are counting on the copyright holder to turn a blind eye. Which usually works - but not always. With Gmod there's probably the additional factor that the way they are using the models is something the owner would never do, so there isn't even theoretical loss of income related with it.
Still, the blind eye-thingy does not hold up in court, or more importantly wouldn't be of much help if Square decided it wasn't going to do it anymore, and sent a cease and desist. The thing is that they could send a cease and desist to the forums, which is bad. Sure, you could go to a court over it, but most people are not made out of money or time.