Funnily enough I've got this very problem at the moment. I need to design a board to replace our existing 8051 based unit as the flash and ram chips are getting hard to get. So my solution was to run emulator code to run the 8051 binaries then slowly migrate over a number of applications in time. I could use newer, more integrated 8051 parts, but I'd still need to modify existing code and do 3v<>5v level translation anyway. I'm building in an ethernet port for for new applications, so the extra performance going to an ARM device will be a bonus. At least one escapes the harvard memory issues with the 8051 which are a minor annoyance.

I didn't even bother to consider using a Microchip MIPs based device. I think Microchip are just a bit too late into an already crowded market.

Lynn, your proposal sounds good, but for me a re-design is in order. Maybe doing a PIC plug in with an ARM core might get you some sales! Especially since a lot of PIC stuff is done in assembler - suckers!