If someone was to make FF7 or any other protected IP verbatim, copying literally every pixel and claiming it as their own work, then yes, that's theft and should be punished. But consider this; everything is based on something. All those fantasy games with elves and dwarves and orcs, do they need to be shut down because Lord of the Rings did it first? Any video game that uses a gun should be shut down because Wolfenstien did it first, right? Hell, my avatar should be banned because I don't own the rights to Pikachu, even an evil one, even though I painted that picture myself.
See what I'm getting at? There's a huge difference between copying something and basing your work around something. This game clearly isn't FF7 itself, it's a reimagining of the story through a different style. Ergo it's something different. I believe copyright shoudl protect the exact work, not anything that might be a little bit like it, because once we get into that second mentality where nothing can ever be like anything else, then we'll be left with basically nothing. It's said that there are only seven stories in the world, they're just told through different eyes. When you really think about it pretty much every beloved franchise is building on the foundation of that which came before. You think Star Wars is an entirely original concept? Indiana Jones? Nothing is truly original any more. And companies need to stop weilding copyright law like a banhammer to make sure nobody can ever make money with something close to original thought.
This game looks like something I'd happily pay full price for. If Square Enix actually listened to their customers and realized we're excited about this instead of just making what they think is cool and shoving it down our throats (IE: Lightning Returns) then maybe they could compromise and see this project made truly fantastic, but they'd have to share the profits with the creators and in today's greedy bloated industry it's an all or nothing game. If they can't make all the money for themselves then nobody can have any. It's a childish way to run things. Say this game makes, say, $10M profit. Square Enix makes a good 60% of that, minimum. But they don't see the $6M in their accounts, they see the $4M that isn't. They see the loss but not the gain. And when they'd be getting $6M for doing basically nothing and still complaining about it, you'll forgive me for not having any sympathy for the greedy short-sighted fuckwits.