You're right. There are 8 and 16 bit PICs. They are fast enough to emulate a slow 32 bit device (eg USB 1.1 client) but not a *fast"* multi function computer.
MAME is an arcade game emulator which runs on many platforms. Install MAME; find the ROM image for the arcade game; play. The emulator includes libraries or modules that translate processor instructions from the arcade game to the host machine. If you can find a way to use the libraries, you don't need to reinvent. Enthusiasts have done that already to emulate computers (see MESS).
