The only version of OS X that can be run in a VM is Leopard Server. And even that requires Leopard Server to be running on the host machine (according to the EULA). So unless you want to delve into osx86, the option of running OS X in a VM is out. And if you're messing with osx86, you might as well go all the way and do a native install.
well its always illegal, but using it only to develope iphone app you should not feel bad about it, you're doing a favor to apple. And its not like you'll get arrested for doing so.