The .bin file is not editable in a text editor, the .cue is. Looks like the .cue is valid, check if the filename of the .bin is _exactly Final Fantasy VII [NTSC-U] [Disc1of3] [SCUS-94163].BIN.
Remember that Linux is case sensitive so
Final Fantasy VII [NTSC-U] [Disc1of3] [SCUS-94163].bin is not the same as Final Fantasy VII [NTSC-U] [Disc1of3] [SCUS-94163].BIN.
If it's not a name mismatch, then try posting the whole log file (with verbose logging turned on) on pastebin.com to take a look.
@mitu I checked out those points you recommended and they all seem fine. Im going to seem like total idiot now.. Everything else was fine but I just had to update the retropie setup. Then I updated the emulator again. I updated everything not too long time ago so I had no idea it could be that. I even uninstalled and re-installed the psx emulator and updated it before doing this. Now im wiser and can potentially help some other people in the future.
I really appreciate your help, it pushed me to right direction.
@a12c4 My suggestion was for the situation you described where you have a .cue and an .img, it's clear that the .img functions as a .bin file. Give it a try and see if it works.
For other things, you could get away without a .cue file, but I don't think it will work for the situation you described - .bin containing both data and audio data. A .bin without a .cue means - for me - that there is only a data track on the disc image file, in which case you can rename it to either .iso or .img and don't generate a .cue. If the .bin/.img/.iso contains something else besides 1 data track, then the emulator would not be able to separate or read the separate audio/video/whatever info because it would not know where to look them up.
@singsonn the path in the cue sheet isnt started with something like "c:/../.../gamename.bin"? You have to remove all that info if it does. I had to fix tons of pcengine and sega cd games because of this. This might not be your problem but i havent seen your cue sheet.