I had a company come out to bid doing my custom stairs. I told them I would install the wood on the tread and riser. When I told him that I was planning on using engineered wood he warned me that this was a very bad idea. He said the concern is that the weight on the stair nose (where most people step) would eventually cause either the tongue of the engineered wood to break or cause the engineered wood to left and separate from the plys. He strongly recommended that I only use solid wood for the treads and
stair nose.

I can see his point but I am thinking if a I use a quality engineered wood and adhesive I should be ok right? The wood I plan to use is 5/8, 7 ply (I think).

Incorrect!

If done right flooring and nosing's will perform just as well as full treads.

Urethane glue everything, and brad nail the nosing,