Disc space is no longer an issue considering we're now playing games on Blu-Ray Disc and if you honestly think about it if they kept the game the same way it is now and only did a graphical update the game would probably only take up roughly half a BD (character models and assets do not take up a lot of space especially considering almost all developers use the lowest possible poly-counts for their models, all you're seeing is great texture work (yes it pays to have a degree in Game Design sometimes)).
The issue Square is having is they don't want to invest the manpower or time into recreating all the art assets, redoing the soundtrack, and sprucing up the old code to make it work on new hardware. Plus, and I do agree with this, it's not worth it if only a handful of 25-40 year olds are going to buy the game for nostalgia. They're redoing the whole game because they want to bring in the current generation of gamers, the ones with the short attention spans who want action based combat and no thinking. The ones who button mash and don't learn how to take an enemy down the right way, using game and boss mechanics to their advantage. Basically they're kicking our generation in the nuts to cater to the younger generation. While I understand where they're coming from I don't agree with it.
This is why they feel they need to split the game into parts to make it easier on them to rewrite code for Unreal 4 (which yes they are using that engine for this) and to slowly redo art assets to make them all pretty and shiny for the ADHD generation. You already know they'll cut the Ruby and Emerald fights since they are optional, Ultima will probably be cut down to one fight and you'll just have to craft or find Cloud's ultimate weapon, only a handful of Limit Breaks will be brought over into the game (probably the big ones), summons will be minimal (probably only one Bahamut summon and most likely not the awesome one), Chocobo breeding/racing will probably be taken completely out (bye bye Knights of the Round unless they just give it to you), they materia system will probably be gutted to make it simpler and easier to understand for the current generation of gamers, and say goodbye to your airship freedom from the original. They'll also, even though they pretty much said they wouldn't since they're cutting the game into pieces, summarize a lot of the non-important story events you go through.
While yes I'm pessimistic and I've already said I didn't like the original I'm just appalled that this is what developers feel they need to do to old games when they remake them. I can guarantee you if they ever decided to remake FFIX or if Sony decided to remake Legend of Dragoon and they did shit like this to it I would be up in arms about it. Yes, I understand I'm one old gamer who is trying to relive his glory days of RPG gaming but you can't go and gut a classic game like this and give us a shell of what it once was. Hell I could be wrong and you'll get an awesome game remake that tops the charts and brings back massive interest in the genre but, as much as I love them, Mass Effect/Elder Scrolls/Dragon Age/etc. has ruined the RPG genre as a whole and has turned them into nothing more the Action games with RPG elements.