If you are installing a mod chip to play backups, it isn't illegal. A backup is a backup of a game that you actually own, so only in that case, it is not. But you are still voiding your warranty.
I have played FF7 all the way through without any noticeable problems. I think I used PCSXbox v13 at that time, because there are higher versions out today.
How well does PCSXBox emulate games on the XBOX1? Impressively well, although it does require you to change some settings around, but the errors most likely are not large enough that a game isn't playable.
With a logical guess, I would say that when the time CD-Rs and DVD-Rs were first introduced into the market, they were around the same price range, so I would wait roughly three or four years for the prices to drop.