I've seen NES and combination SNES/NES clones for sale at Microcenter (or maybe it was somewhere else, I don't recall, but it wasn't the type of store to be selling illegal things). So, yeah. Bleem! (a commercially sold PlayStation emulator) was found to be legal in court. I don't think hardware products doing it are any different.
The main problem is that most places selling handheld emulators out there are also bundling ROMs of every game. And that is illegal.



