The OP is actually pretty close to the money. Android applications are virtualized on Android phones (see: Dalvik). It wouldn't be impossible for Apple to implement Dalvik and a few wrappers for the APIs and tie it to Springboard.

Actually, apart from the Springboard part, and some questionable clauses in the dev agreement, there's nothing to prevent any Joe Schmo from porting much of Android to iPhone and putting it up on the App Store. Apps are written in objective-C which is an ANSI C superset, so there wouldn't be any speed issue.

Compound this with the fact that Eric Schmidt is on Apple's board of directors, and I would say some form of Android compatibility is pretty likely in iPhone's future.

And runs slower than a retarded turtle? The iPhone has trouble running its Springboard GUI efficiently as it is.