it's mostly faithful to the plot.
then right at the end post-advent children sephiroth hijacks the plot and makes cloud kill the things keeping the plot canon.
then there's a VERY HEAVILY ADVENT-CHILDREN INSPIRED FIGHT with him where he makes remarks such as "ah the memories!" and stuff, implying that he's sharing in our nostalgia trip with us.

So yes, a fully self-aware, post ffvii sephiroth went back in time and is the main antagonist of the new ffvii. it's a "remake" because sephiroth is remaking it.

the title had a double meaning, it was a sequel all along.
supposedly this is happening in a parallel timeline with a different cloud and co. because they get flashbacks of the original ffvii and advent children.