@Retired Engineer: The software you're talking about has been written -- by Apple. It's called the iOS simulator and it's a tool available to those who download Xcode -- the Apple SDK. Additionally, some applications are partially available for use through iTunes when you plug your iOS device into your computer. While this feature is designed around organizing your apps and syncing your data, some application functionality is still available.
Even if third-party iOS simulators didn't exist (which they do, in abundance), I don't know why you're so quick to write off the possibility of OS virtualization software; as this type of software has been commonly available over the past decade or more, for various operating systems and platforms. See: Wine (Windows:Unix), Parallels (Windows:Mac OS), Fusion (Mac OS:Windows), Boot Camp (Mac OS:Windows), and probably a lot more.
For media, there's iTunes and AirPlay. And of course, the core native apps on your iOS device are also available for full-feature use on icloud.com.