1. No, nothing that elaborate, but a few people are working on smaller game desingers like Zot! and a native runtime for Fenix, which you can use. I havent tried any of these so cannot offer any opinions on them.
2. I would assume you use it the same way you use it on a real GP32, just use SMC MAKER to create the virtual SMC with the required files and directories. Why play it on the emulator? Why not on the real GP32?