I think if you turn the interpolation off it'll look great, nay, better. There's plenty of retro games showingpixels around on iDevices.
Also as far as I remember Megaball could be installed in the hard drive. It'd be much better to use the files in some sort of HDF file or something than loading from an ADF, the initial wait is annoying and certainly not what you are used to with thse devices. Because you are using UAE as the base for this right?
Would also be nice if you turn the sound latency lower, as the difference now of when a sound happens to when it actually is heard is too big.
Anyway, keep up the good work!