More like code that runs code, not code that generates code. Assuming the latter means that it's generating native code and attempting to execute it natively, that's not allowed.

Code that generates code - specifically user-specified code - has been allowed on the App Store for years now. They have a very patronizing term for it, too: "learn-to-code apps".

Granted, Apple's never going to give you the entitlements necessary to make this performant or let you create separate temporary containers for compiled apps like Swift Playgrounds can. But you can absolutely ship a dev environment on iPadOS as long as you're willing to deal with those limitations.

Emulators don't have to generate code. At the simplest level, a CPU emulator is a switch statement.

Emulators don't necessarily generate code (maybe if they use JIT). They run arbitrary code, but that's other thing.