Sounds like Apple made an exception since NES games probably aren't much of a threat to the App Store or iPhone security.
One of the first iPhone jail-break systems depended on a vulnerability in Safari's TIFF loader, and TIFF files aren't supposed to contain any executable code at all. Why would NES games be any different?
Ugh. Why would any software be different? Please Google "buffer overflow."
I certainly think NES games are a threat. Think of all the successful games on the iphone. A huge percentage of those could run on a NES, or at least dumbed down to run on one.
Sounds like this slipped through the cracks. The SDK ToS are very explicit about executable code, and very strictly prohibit anything along those lines. On that note, I'm buying it now while I can.