You can put a 1 GHz crystal in your A1200..but buy a fire extinguisher and a miggy replacement first 
I doubt it would catch fire, but it won't do what you want. It's likely that it will keep on not doing what you want after you put the 14mhz crystal back. Unless you actually want it to sit there doing nothing, but there are easier ways of achieving that than replacing the crystal.
MOVE16 was at least used in some of the CopyMem patches:
http://aminet.net/package/util/boot/CopyMem It is theoretically possible to achieve the same compatibility as the real chip, including the FPU and MMU. The speed and size of the FPGA in use will limit the performance. Potentially all the way down to zero if you can't produce a design that fits. Using microcode + a sequencer should allow it to fit, it just won't necessarily be fast enough. There is also the problem that someone has to do it.
A sequencer is like a cpu that is designed specifically for doing one task, which is to run the microcode. The microcode is like an emulator that is written for that cpu. As you design both in tandem and can make compromises based on exactly what you need it to do then it works out a lot faster than putting in a general purpose cpu and porting an existing emulator core. But you don't have the luxury of stringing together other peoples work, it's where the glory is though.