You are right that Dalvik was written to be optimized for mobile, but you have to understand compared to what. Dalvik is optimized for mobile compared to simple VMs that don't have a lot of work put into them -- not compared to HotSpot. Java's embedded versions have had a lot more effort put into them than Dalvik.
Dalvik itself was plan B for Google, after they'd failed to secure a licensing deal with Sun (and didn't want OpenJDK's GPL). It wasn't anyone's first choice, and certainly wasn't some new powerful technology. Just a VM that was good enough compared to the effort that's been put into it.
There are open source (obviously) OpenJDK distributions[1] specifically made for embedded devices (although you can build them yourself), and (proprietary) editions of Java have been running on devices as constrained as SIM cards for much longer than Android exists.