Random info.
FF7 was originally made on 3 PSX CDs.
The actual "game" portion of FF7 was 185 megabytes, with 998 megabytes of FMV (I just checked the PC version). That's less than two CDs worth of data, but the "game" would have to be doubled to be stored on two disks, which just barely pushed it over the 2-CD mark, so they made it a 3-CD game.
The FMV is completely uncompressed. The "game" contains stacks and stacks of uncompressed images for all the pretty prerendered backgrounds. MIDI audio and all that space-intensive "mature storyline" which wasn't possible in games like FF6 [/sarcasm] make up the rest of the "game" portion.
Angel Studios looked at FF7, looked at Nintendo's latest 512-megabit (64 megabyte) cartrige, looked at Factor 5's compression programs, and decided that FF7 could fit on an N64 cart. They asked Square if they could do it, but Square refused, either because they had been talking a lot of trash about how inferior the N64 was and didn't want to turn back, or because they had great respect for FF7 and didn't want to milk it with a port, or because they knew that Sony would never let them get away with it.
So Angel Studios went to Capcom and got permission to do RE2-64 instead. They succeded quite nicely, except that the voice acting in RE2-64 didn't sound quite right when compressed as much as it was (there's no voice acting in FF7).
With twice the size (one gigabit) being available for DS games right now, and four times the size (two gigabits) likely being available sometime next year, and even more effective compression technology, I would say that there's no question that FF7 could be done on the DS, and done even better than RE2-64 was.
The DS doesn't quite have as much resolution as a TV is capable of, but FF7 was pretty low-res. It might take a hit on the resolution, or some cropping for the semi-widescreen (both of which would result in smaller sizes, which would mean less severe compression would be required), but I don't think it would be major.
Of course, I don't think that Square would ever allow it (at least, not on a handheld of this generation, unless it's the PSP), because it would make people think that FF7 was less impressive than they wanted everyone to think it was.
Y'know, I'd actually prefer it if they made a 2D remake of FF7, in the style of something more like FF6 (but improved, of course). Lots of people are saying they want FF7 to get the RE Remake treatment on a modern console, but I'd actually prefer a 2D remake on something like the DS.