I have been trying to run market in Android 2.1 & 2.2 emulator and every time I ended up failing.
This time I came across instructions in 2 different website and was able to successfully run market in Android 2.3 emulator.
As some people have said after multiple tries only I was able to add google account.
Once google account was added market was running but some intermittent crashes happened.
But I am running market successfully.
The following links might help to run market in emulator successfully.
PS: Some times Varun’s blog doesn’t load but the instructions are similar to the one in XDA-Dev site.
I followed XDA-Dev instructions and it worked fine.