This only means that Civ3 mods, which will now be compatible with this new game, will have to be ported. If anything, it's extra work.
Not if
@Puppeteer can pull a rabbit out of that hat and convert everything!
C7 is meant to have the ability to use a Civ3 mod and/or save file as a starting point. Of course, that (I think) leaves you with most of the modding limits of Civ3.
For terrain graphics, I've already had C7 showing custom terrain when hard-coding the paths; the only blocker right now is figuring out where Civ3 stores the path to the media and how it searches. I have it mostly figured out, but two sources of paths have proven incorrect so far, or else I'm running into an issue I haven't seen. But I think in the pretty near future C7 will be able to open a modded Civ3 save and show all the mod art where appropriate.
As for game rules, we don't really have a native C7 rule set format yet, but since we can read the BIQ and be able to use the rules in C7, I'm thinking a one-click conversion for rules should be possible, and then any extra C7-only features can be added, like more than 31 civs, more strategic resources, etc..
As for media format, we've tossed around some ideas, and I love coming up with wild ideas for the future. In the short or medium term I imagine 32-bit color graphics (vs 256-color palette) with full alpha is an attainable thing, although implementing civ color is something we're only starting to talk about, so I'm not yet sure how that fits in. But we haven't talked about folder structure yet.
As for the more "out there" ideas...I'll just say that the current 9x9 terrain tile layout could probably be swapped out for something better. But that's in a far future. Probably.