While I won't say it's impossible, I will say it's unlikely. You would need to custom compile the MySQL server, PERL, and EqEmu server tailored to your specific jail-break. Then you have to really consider the actual usefulness of such an "iPhone Eqemu Server". Just because the processor is a 1Ghz and has 512mb of ram does NOT mean it performs anywhere near the same as a 1Ghz desktop/laptop CPU and 512mb ram, not to mention your battery life would be horrible. Until you get true Out Of Order phone processors it would be very slow on startup and then handling zones/clients. Then you have the latency of your "wireless" internet/wifi to factor in. Just because it says 3/4G and N-wifi does not mean either function near to what their desktop/laptop parts do.
All-in-all, I am not saying impossible, just highly improbable unless you wish to do the leg work since the Emu runs faster, is already pre-writing for i686 CPUs, and laptop/desktops have all of the other required software pre-written for them as well. Why not simply go buy/find an old laptop for $100 and use that instead of the iPhone and call it a day?
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