I have heard lots of rumors on this but does anyone knows for sure?
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There have been rumors since 2005, but Square Enix has explicitly stated that no remake is in the works. I don't think they will be remaking it any time soon, as they haven't exploited all of the possible re-release avenues.
If you need your Final Fantasy VII fix, it has been released on the Playstation Network.
Never have so many gamers been teased, tricked, and disappointed than on this issue.
Producers such as Yoshinori Kitase constantly use this to string people along on this topic for publicity.
Most of the information about possible remakes is collected on the wiki article under "Possible remake". The consensus among the Final Fantasy players I know is that they can't see a reason why not to do it, but the longer it goes on, the less faith they have it will ever happen.