I need an emulator for Windows CE 5.0 to test an embedded device (not PDA or smartphone) application that I am developing. This is what I have already tried:
Visual Studio 2008 Pro includes an emulator. Unfortunately, it does not include a Windows CE image (only Windows Mobile and Smartphone). Yes, there is a difference, see the screenshots here. Windows CE includes a "start button", windows that can be minimized, moved around etc.
There is a Windows CE Device Emulator available from Microsoft. Apart from the fact that its license only permits non-commercial use, it does not run in Windows 7 (it requires .net Framework 1.1, which is incompatible with Windows 7) nor in Windows XP mode (error message: "Emulator for Windows CE will not run one virtual machine within another. Please run the virtual machine on the host operating system").
Is there any option that I have missed?
Yes, the option you've missed is that you can create your own CE image for the emulator with the emulator BSP. You then generate an image and run it with Device Emulator 3.0.
The reason Microsoft no longer ships a CE emulator image is that there is no such thing as a "standard" Windows CE OS image. Generally speaking you create an image that matches whatever you've got on your specific target hardware.