The reason we don't install the game or use any mods from the desktop is because it's a system folder. Windows has it's whole "double-check, are you sure?, click run to continue" verification crap that can't be bypassed with the Bootleg installer, so we ask everything to be installed and run from a non-system folder.
I can't say for sure this is the cause, but modding from the desktop can cause some mods not to install properly. For your case, I'm unsure if it's interfering with the injection for the FF7AnyCD.dll. As long as that injection is working and you have a drive labeled FF7DISC1 that Bootloader is set to automount, there should be no issues.