Next, you'll be telling me that you infiltrated Square Enix yourself and deleted the files. I'm done.
On further reading, I don't think they actually "deleted" the source so starkly. The only thing truly lost was the ability to remake the FMVs.
I do believe it's possible they outsourced the making of the FMVs, at least the high-quality ones where the character detail jumps up significantly over their usual blocky forms (which would probably denote the in-house cut-scenes). It wasn't possible to re-render them for any number of good reasons, not the least of which that the job was over and people and equipment used for the originals had moved on to other projects. So without the ability to create an HD version, the team porting FF7 to the PC were stuck with an SD version that was designed to be rendered with a PSX. But PCs don't render graphics the same way, so they had to make a copy of the copy that a PSX rendered and displayed that on a PC screen with a max resolution of 640 X 480. So it probably looked as good as it sounds.
But the article goes on to state that FF7's engine was used in other games like Parasite Eve, so it wasn't like they chucked the whole source or anything. They just might not have had as good a source control as they ought to have.