Final Fantasy VII is a multi-disc game. If you have the raw disc images (usually .bin and .cue files), you must convert them into a format the PSP understands.
Since Final Fantasy VII is a multi-disc game, you will eventually hit the "Please Insert Disc 2" screen. Press the (or PS ) button on your PSP. Select Switch Discs . Choose the required disc and press X . final fantasy vii psp eboot install