Importing models straight into photoshop is definately not the way to go about it.
Conventionally, you use the UV map from the model to texture it. Since the originals were coloured with vertex colouring, that weapon more than likely doesn't have a UV map, which means you'll have to make one yourself with a 3D modelling suite like blender or 3ds Max.
Once you're done creating the UV map, you can render out the template and photoshop to your heart's content over the top of that. To get it back into FF7, you're going to need to export the model into the .3DS format, get Pcreator & IMG2TEX (I'm pretty sure Kimera's still buggy when it comes to 3ds importing) and convert with those. Then you can repack the LGP and you're away.