I certainly agree with you that running RISC OS on an emulator undermines its credibility, making it look like a dead OS. But to me this is one reason why it's so important that the hardware market is kept alive.
Converting to native x86 won't solve this problem, or necessarily allow more people to run RISC OS: in fact, even if it were ported, it would still probably make more sense for most people to run it under emulation. Running it on top of Windows shifts all of the hard work of maintaining hardware compatibility onto Microsoft. There are so many variants of x86 hardware that it would be impossible for an x86 RISC OS to accommodate them all. Most people would probably find that it simply wouldn't run on their x86 machine.
One of the only reasons RISC OS can be made to work so well on the hardware that's available, is that there is so little variety in the hardware that it will run on.
Regarding your point that people don't care whether or not the machine code is easier to program, I agree that this may be true for the majority of people. However, I for one remain with RISC OS in part because of the ease and control you get programming the ARM chip directly. An emulator wouldn't suit me for this without the real hardware also being available.
Now this may not be what most people want, but I'd have thought the people most likely to care about this kind of thing are developers, and they are people that the platform will need if it's to remain viable.
By the way, I'm not knocking the emulator, which is clearly very useful. I just think the hardware market is totally essential to keeping the platform alive.