I agree 100%. FF7 appeared to be semi-realistic at its time, because the graphics were so much more advanced than most things out there. However, noone's brain was being fooled, things weren't even close to approaching the uncanny valley. So while people could oooh and ahhh over the "realistic" graphics, the game was still quite free from the prisons that realism creates for fantastical situations. Unfortunately, people often associate FF7 with realism because of what it meant to them at the time, and because the PS3 is completely centered around realism, a modern day remake would HAVE TO be made realistic in order to escape huge backlashes from fans. FF7 is a stylized world with stylized characters and stylized events. You can't drag something like that into something that looks like the real world.
The best we could hope for would be a remake with modern-day stylization. Give it a unique stylized feel that looks visually stunning, yet is entirely unrealistic. Use a comic book style, or a hand drawn style like Okami, obviously something that doesn't look too "kiddy" but is going to wow audiences while not becoming too realistic for its own good. Unfortunately, most fans are IDIOTS, and won't realize that there's a problem with "FF7: Realist Version" until it's too late. If S-E was to remake FF7 in ANY OTHER WAY than realism, fans the world over would be blowing their heads off.
The reality is, FF7 is a product of 1997... its unique charm comes not only from its construction, but from where people's heads were at, visually and aesthetically in that era of gaming. Had it been a year later, it would have slipped under the radar... had it been 12 years later (today), and it would be a laughing stock. You can hope for a sequel, you can hope for a spinnoff, but a remake is almost total suicide.
FF9 is a completely different story, and would be the easiest to remake, since it was purposefully stylized to begin with. FF9 drew a lot from Pixar-style cartoon animation (I still stand by the idea that Steiner was modelled after Buzz Lightyear). People would expect a remake to be unrealistic, and there for it would be free to be as zanny and weird as it originally was. Unfortunately, its sales weren't stellar and people aren't as rabbid about that title, since the whole game is a bit more downplayed and less serious than FF7.
FF8 wouldn't gain or lose much, since it's style was basically a prototype for FFX. FF8 was definitely aiming for more realism than FF7, most of the modern FF games being decended from the styles that started with FF8. Would it fair well in the marketplace? Absolutely not. Many diehard FF7 fans have been able to accept FF9 as a worthy title, because it's such a huge stylistic departure, but FF8 is the antichrist as far as a lot of FF fans are concerned. Getting it remade when FF7 was left collecting dust would be a huge slap in the face.
Edit: In reading some of the replies people made to Jeremy's article, people need to stop using the localization as a defense for why some of the writing isn't very good. Sure it's not a great localization, but some of the CONCEPTS in the game are just kind of off, that's what Jeremy was talking about. It's not like the writing of FF7 is the devine work of God and the localization is some cheap rippoff, some of the bad writing is the original's fault too... people are just wearing blinders.