Actually using a vm and Xephyr won't answer this question. Scratchbox is running as x86 code. It is designed to allow a developer to run and test his code which is compiled as x86. Garnet VM would be ARM code which is why you got the unsupported package. ARM uses totally different instructions and does "really" run under the scratchbox.

Nathan
PS Xephyr is basically the "monitor" to the scratchbox emulator.