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If this is basically breaking the discs into their own "episode," I'm fine with it. As long as each episode is no more than $20-30. That would be a huge success and allow them funding to complete episodes 2, then 3.

My fear is that this episodic approach is to avoid having a world map, having you just transport from one place to the next and only play the major events. Making you pay extra for Yuffie's and Vincent's side quests.

First way, I'm fine with and I think most will be. The latter, I won't buy unless there's a flash sale on PSN, or they give it for free with Plus, and I think it has a much larger chance at failure.