Yes, the graphics sucked...it was also the first 3d Final Fantasy. Gameplay sucked too. It had some good points, by and large, but over all the grinding and repetitiveness to just increase a bunch of numbers was...well actually, its on par with almost every MMO these days. Certainly the gameplay could be faulted for many, many things.
Now on the flip side, and the reason why I still count this as my favorite RPG is the setting. First, I loved the story...story is something that is always subjective, of course, but I just dug the whole evil cooperation exploiting a power source that is actually the lifeblood of the planet. I don't think that counts as a spoiler since at this point, in game time line, that's like saying that King Kong dies in the end, or that soylent green is people. Second, I dug the art style. The backgrounds in particular, I just loved looking at. Yeah, the monsters are goofy, in FF fashion, but everything else had a certain class about it. Lastly, and most importantly, is the characters. In every other RPG (Or any game, really) I have ever played, I have enjoyed characters. They have been well written, funny, powerful, a whole bunch of things. But they are always just a vehicle for the story, to be enjoyed with a certain detachment. But not Final Fantasy. I have no shame in admitting that I was absolutely infatuated with Aeris. Something about her character was just so appealing to me, that I kept a saved game around the time you get to play as Aeris, just to be able to see things from her perspective. I wanted to see what the date sequence was like with other characters, but I just couldn't bring myself to be mean to Aeris. Her death definitely got me a little teary eyed, and I felt palpable catharsis when I realized that she was an amazingly done Christ-figure. Throughout the game, I actually was emotionally invested in her character, perhaps moreso then any other character in any media. From the flashback of her consoling her adopted mother about the death of her husband, to the dream sequence in the woods. Just seeing the patch of flowers and hearing Aeris Theme playing has more emotional gravitas then anything in any other video game I can think of. And im not particularly sappy about game characters either, its really just Aeris. The other characters too, are very identifiable, distinctive, and stylish, to make draw you into there story. Even people who have never played the game probably know more then they care to about Cloud, Tifa, and Sephiroth at least. So yeah, you can fault FFVII for a lot of things, most of which are attributable to the extreme age. But if you are looking for well done characters with simple, powerful emotional appeal, you have got to love FFVII. I know that when i'm done posting this, I'm searching for my discs.