I was a bit surprised that they're going to split FFVII but I don't think it's either good or bad. It all depends on how they handle the split. First and foremost, I believe that dividing it into more than three parts would not only be a commercial suicide but also very negatively impact the game's quality. Even after expanding it with all the new details, you can only stretch this story so much without bogging it down. For the same reason, I think each part is going to have about 20-25 hours of the main story (or even less). I know many fans will cry that it's too short, but remember that Chrono Trigger, one of the most beloved RPGs of all time, was also this short.
Now about how I'd like the games split:
First game I'm okay with being only/mostly Midgar. This is the part I think will be expanded most. There are two points when it could potentially end: one is obviously right after leaving Midgar, the other is in Kalm. Journey to Kalm could serve as a sort of epilogue to the game, with the change of pace and seeing the barren fields surrounding the city slowly give way to greener areas. Also the flashback introducing the main villain would bring a nice closure to the first part, while giving the player a taste of what's to come next.
Second game could end after Aerith's "incident", but I think it's too early. A better point would be Northern crater, after the story fully unravels and all the plot twists that take place. It would end with a great cliffhanger with the party barely making it out alive, Sephy summoning the meteor, Cloud falling into the Lifestream, Weapons, etc. It would also nicely lead into the...
Third and last game, where the part you play as Tifa could serve as a nice prologue. It's also the moment you get Highwind and the game world becomes fully open, so it makes sense gameplay-wise to make the split here. This part would last until the end of the story, of course.