It looks like the NES emulator for the iPhone is making some progress. The developers have released a video demonstrating the iPhone running the classic Super Mario Brothers. It has no sounds yet, which isn't surprising since it's in its development stages.

The speed is a bit slow though, which makes it a little discouraging. Also they seem to have done some liberties with the controls to compensate for it's diminutive scale. When the gamer pressed forward, Mario just kept moving forward even when he released the button. He opened other games but didn't demonstrate the keypads further so we'll have to wait and see how they fare with the developments.