Which is pretty much exactly how NES and SNES cartridges worked, come to think of it—except that the console they were patching was hardware, so they had to add new physical chips to do it. (Speaking of, I've always wondered why no console just ships with some FPGAs inside that are free for each game to program on startup.)
There's also the issue of developing for an fpga being more difficult, and thus time consuming, than writing tight c.
Compare this with the PS2, which has a bunch of crazy programmable coprocessors to build an extremely flexible but hard-to-emulate system.
It's probably no coincidence, given that it was developed by ex-SGI engineers who founded their own company, ArtX, who got bought out by ATI to develop the R300, one of the first modern programmable GPUs.
The 3DS processor is capable of emulating 8-bit systems, as it has virtual console NES and GB/GBC games. SEGA also ported some Genesis games to run on the 3DS, but I think they had to re-write parts in native ARM code as straight emulation wasn't fast enough (Google "Sega M2 GigaDrive" for a great series of interviews about this).