Dirge of Cerberus was like a side story or some such. Definitely wasn't an RPG.
You know, I'd almost rather they not include most of the original cast (as party members).
Here's how I'd do it. Start the game about 15 years down the road. Enough time to really see the changes that would happen to a world that suddenly lost it's economic stability. Suddenly people have to live much differently than they did. You'd play as an older and wiser (and less assholey) Cloud.
I've really got no idea as to the specifics of the plot, but one could see a game being set on the same planet but a planet that has gone through a lot of change.
I would love to run into past FF7ers in unexpected ways, maybe without warning you'd run into Red in the mountains and have him join your party (one or two originally part members being optional/integral party members would be neat, just not everyone)? Or maybe you'd run into a thirty year old Yuffie, who's now the cutthroat head of a thieves guild? Maybe in a twist, someone like Reno would join your party (to avenge the death of his fellow turks)? Maybe we'd meet a middle aged Barett, living it up in retirement just south of the Midgar ruins?
One thing's for sure, the game would need to end where the first game started, and that's in Midgar. In this case, deep in it's ruins. I'm under the understanding that Cerberus went this route, and that's okay. Never can get too much Midgar.