I agree fully, it's a huge productivity win. I built a small layer that simulates or at least stubs out all the device-only APIs for the desktop target; switching resolutions & DPI dependent assets (works), loading translated strings from Android XML files (works), opening the marketplace (stub), setting alarms and timers, etc.

I estimate I spent 99% of the development time on the desktop target with a redeployment cycle of just a few seconds, and only test on the device occasionally.