They'll do it. It may not be a scene for scene, mechanic for mechanic remake, but they will remake it in one form or another. It's the single most valuable IP they have and, for reasons beyond me, this game's story and characters have the most resonance among their target audience. Unless they come up with some new killer IP, and FFXIII ain't it, dimes to dollars they'll come back to FFVII in a big way.
Honestly, they're running out of remake material. After FFVI and Dragon Quest VI get their 3D update on the DS (FFVI is certainty as far as I'm concerned), what have they got left that's feasible remake material? Parasite Eve? Nope. Soul Blazer? Nope. Xenogears? If you think FFVII is never going to get made, then definitely forget this game. Vagrant Story is the most obvious candidate for an easy transition to modern consoles and expectations.
So while I totally agree that a FFVII remake would be expensive, and is probably impossible as a town for town remake, I think the game will see a serious update, albeit in a slightly different form than fanboys are probably hoping for.