"If FF7 could fit all of the story in one release, why can't Remake?" Did you forget the part where they were able to take a huge shortcut with the entire world map by simplifying it like this?

They'd have to model all of midgar, an entire overworld, every single town and city, all the monsters, and do all of that with the level of detail that 7R did. You can't fit all of that into one game without cutting corners, which is what FF7 was able to do because its a ps1 game

FF7 was also an incredibly ambitious game for its time, but the presentation being as simple as it was allowed them to leave a lot of details up to player's imaginations.

also I'm no artist, but I'd imagine modeling detailed 3D environments would take a lot more time than drawing pre-rendered backgrounds