Considering XV looks like it's going to be a pretty huge game, I bet they could use that engine to build FFVII with. Before, Crystal Tools would not really be able to handle the game.
If Verendus is right, then this is a humongous undertaking. Imagine, the original game uses separate maps that are all angled in specific ways. A 3D remake will have you walking on a big giant map with all those little ones connected. They will have to basically redesign everything entirely, almost as if they are making a new game. In a way, I can see how it would actually be harder, considering they are limited in what they can do: they have to make it embody the original. In a new game, they can simply start fresh and not have that limitation.