At first I was upset they may separate the game into multiple sections, but it makes sense.
In 1997 dollars, FF7 cost $45 million to develop. Note that the music is all midi and the backgrounds are all pre-rendered. Also, albeit what most these clowns are saying, the story took 50 hours to complete, and if you went for all of the extra materia and weapons easily 99+. Hell, it takes around 7 hours to leave Midgar and actually get to the world map. Now, they are adding voice actors to the mix as well as completely reinterpreting the battle system etc.
Game standards have come a long ways as far as presentation and developers can't cut the same corners they could back then. Modern games require fully developed levels, competent voice acting (the trailer has me concerned), and fully orchestrated music. The pre-rendered background shyt just wouldn't work noways. This isn't a simple remake, this is a complete reimagining of the game for modern gamers. Also Square must realize this remake could quite literally make or break them. Square knows this game is going to be about fan service and it has to sell well. Additionally, if it is episodic it creates a greater incentive for them not to fukk up each episode so that we keep coming back to purchase more.
We all are operating under a lot of assumptions here, but I would imagine they are going to go the route of FFXV and do away with the world map and basically create a whole world we will have access to with a fully-fleshed Midgar to boot. The episodic content won't deal so much with space as it will with the fact that creating all the stories, voice acting, and bringing the game up to modern standards will require a monumental amount of time.
That being said... If they do skimp out on content and try to charge $60 a pop then fukk em.