If you had to make ff7 into live action, the first thing you'd need to do is to change the script (and quite a few parts of the plot) to be suited to film ( a 3 hour film). This could be done. You would also have to change the dress of the main characters. Aerith would be wearing rag tag slum clothes for example. In real life, Aerith would be a rather downtrodden slum girl, short on money and food (like all of the Slum).
With the right effort, and the right brains behind it, you could make a very good novel or film based on FF7. Sadly, that isn't the case here. This is just a bunch of brain dead idiots who don't understand anything about film (and the makers of Advent Children didn't either). You cannot hope to make a proper film of FF7 by treating it as a game. Sacrifices have to be made to bring it to a larger audience and for it to work as a film.
Then there is the problem of Red XIII. How is anyone going to make him work in live action? You'd need state of the art CGI for a start. It would be a case of either big budget live action with amended script/plot, or CGI film based on FF7 with amended script/plot. Personally I think the latter would work best.
I would be more than happy to take up the challenge of writing the screenplay to such a film, if it was officially endorsed and I was paid.