More than just a large fan reaction, and that's even with Squenix having said, various times, that it's not happening.
The re-rendering was done by Squenix as a Tech Demo for Sony's E3 2005 Press Conference, where they officially announced the PS3. For those who want to see it:
Gametrailers.com - Final Fantasy VII, Sony Press Conference
Recently, this was discovered:
Final Fantasy VII remake confirmed in Crisis Core? :: PlayStation Universe (PSU)
At the end of
FFVII: Crisis Core, after beating the game for a second time, a similar video to the Tech Demo above is played (it contains a couple of extra things). At the end of the trailer is the image:
The Famistu rumour I posted above is a couple of days old. There was also news, a day or two ago, of a new FFVII game (most probably a spin-off) called
Endless Crisis: Final Fantasy VII.
Endless Crisis: Final Fantasy VII to be announced at TGS? :: PlayStation Universe (PSU)
Should be interesting to see what exactly comes from the Squenix Conference tomorrow.