I'm pretty sure it'll get a physical release. It's going to be a huge game and digital distribution for anything exceeding 20GB gets to be a pain in the ass for most people.

It would be disastrous for them to try and break this up into episodes. The concept of open-world games in general are incompatible with the episodic format. FFVII is pretty linear as far as open-world games go, but open-world nonetheless.