So how does MorphOS manage to run these classic programs as if native like this without the use of UAE? This just blows my mind!
While MorphOS is fully PowerPC native it implements all the programming interfaces that are used in the classic AmigaOS applications, including PowerUP and WarpUP, Warp3D. MorphOS also includes a 68k CPU emulation (both slower but accurate static emulation and highly efficient Just-In-Time translation that translates most 68k code to native PowerPC instructions on the fly) that makes it possible to execute the amiga 68k applications. This all makes it possible to run old amiga applications as if they were native MorphOS applications.
Needless to say it took years and years to all this working properly, and there still are some things that don't quite work 100% yet. :-)
There also are limitations: Since these new machines don't have the amiga custom chipset, any application banging the HW directly needs to be run inside UAE. This mostly means floppy games and demos.
Is this the sort of features we could hope to get from AROS some day as well?
AROS needs to take a slightly different approach to this emulation, but in theory AROS could have the same features. Here's a project that I believe has most promise:
http://emumiga.com/Needless to say it'd be ton and ton of work to implement everything.