Small correction: they actually cloned/converted the Apple Smalltalk image, so those bits remained. The VM was created from scratch by writing it in Slang, a Smalltalk dialect that was essentially equivalent to BCPL and could be translated to C.
They did drop the object memory part completely and designed a new one from scratch.
Previously people had manually translated the VM from Slang to Pascal or C (I did so myself in 1986) but for this project they wrote a tool for that (in Smalltalk, of course).
Here is another copy of the "Back to the Future" paper:
"Produce a new image:
- Design a new Object Memory and image file format.
- Alter the ST-80 System Tracer to write an image in the new format.
- Eliminate uses of Mac Toolbox calls to restore Smalltalk- portability.
- Write a new file system with a simple, portable interface."
Hmm...I wonder if Dan used the PDF writer I wrote for him to produce that version of the paper...