It's an ARM based CPU designed by the people formerly of PASemi, which apple bought up for 278M USD a few years ago.
I don't imagine those guys would have any problem designing ARM based processors any more than they did PPC ones.
Actually the CPU is a 45nm shrink of the 65nm 3GS CPU, although it has more L2 cache. It is made by Samsung. It's probably an Intrinsity design, as Intrinsity developed the 3GS SoC for Samsung, and Apple bought them recently.
http://www.chipworks.com/A4_is_Samsung_45nm.aspx"What we found was an APL0398 chip, presumably the next-generation processor from the APL0298 that we found in the iPhone 3GS. "
You don't replace an ARM Cortex A8 with a PowerPC core, and then redo all the internal hardware and buses to account for the different architecture, and them keep the product code virtually the same.
Also there's no evidence of an emulator.
The performance increase is perfectly explained by the faster CPU and extra L2 cache.
