Well before I read your last response I had decided to try re-installing the game itself. I just downloaded the v1.02 patch and the driver separately. I'm not sure if this is the right file because it was just called APP but here are it's contents.
INFO: FF7/FF8 OpenGL driver version 0.7.8b
INFO: Auto-detected version: FF7 1.02 US English
INFO: NVIDIA Corporation GeForce 320M/PCI/SSE2 3.2.0
INFO: OpenGL 2.0 support detected
INFO: Found swap_control extension
INFO: Max texture size: 8192x8192
INFO: Original resolution 640x480, window size 640x480, output resolution 640x480, internal resolution 640x480
ERROR: failed to stat file C:\Program Files\Square Soft, Inc.\Final Fantasy VII\/shaders/main.vert
ERROR: failed to load shaders, reverting to fixed function
INFO: FFMpeg movie player plugin loaded
INFO: FFMpeg version SVN-r21874, Copyright (c) 2000-2010 Fabrice Bellard, et al.
INFO: No shaders, codecs with YUV output will be slow.
LOCK UNLOCK TEST
MATRIX INITIALIZE
INITIALIZE DD/D3D END
ERROR: could not open file C:\Program Files\Square Soft, Inc.\Final Fantasy VII\ff7input.cfg
initializing sound...
creating dsound primary buffer
reading audio file
loading static sounds
sound initialized
INITIALIZING MIDI...
selecting device 0:Microsoft GS Wavetable SW Synth, mid=1, pid=102,
midi data type: GENERAL MIDI
using midi data file: C:\Program Files\Square Soft, Inc.\Final Fantasy VII\Data\midi\midi.lgp
midiOutGetVolume returned: ffffffff
MIDI INITIALIZED
set music volume: 127
MIDI set volume: 127
100% of 127 = 127
set music volume: 127
MIDI set master volume: 100
MIDI set volume: 127
100% of 127 = 127
Entering MAIN
Exiting MAIN
START OF CREDITS!!!
INFO: E:\FF7\Movies\eidoslogo.avi; truemotion2/pcm_u8 320x240, 15.000000 FPS, duration: 10.133333, frames: 152
INFO: E:\FF7\Movies\sqlogo.avi; truemotion2/pcm_u8 320x224, 15.000000 FPS, duration: 14.533333, frames: 218
set music volume: 127
MIDI set volume: 127
100% of 127 = 127
MIDI play: 95
reading midi file: PRE.mid
current volume: 127
MIDI is playing SUCCESSFULLY!!!
set music volume trans: 127->0, step=60
MIDI set volume trans: 127->0; step=60
MIDI stop - OK
MIDI stop - OK
END OF CREDITS!!!
Entering MAIN
set music volume: 127
MIDI set volume: 127
100% of 127 = 127
Exiting MAIN
START OF MENU SYSTEM!!!
ERROR: COULD NOT CHANGE TO DIRECTORY C:\Program Files\Square Soft, Inc.\Final Fantasy VII\save
WM_CLOSE
END OF MENU SYSTEM!!!
Field Quit
MIDI stop - OK
resetting MIDI driver volume - OK
UNINITIALIZE DD