Of course the ps1 could handle it. Use the beta graphics and lower the res of that a little, and there. Also cut some locations to fit on the 700MB PS1 disk. Oh how i miss ps1 days with those little black backed disks... nostalgia
No need to restrict it to 2 dimensions...PS 3d games predate the GTA series (Twisted Metal, Ridge Racer, etc).
Limit the resolution to be more "cartoonish", eliminate freeroam areas to excude spots not normally accessable within the actual storyline...and I'll buy that the PS could handle it without any clipping.