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.

http://forum.xda-developers.com/showthread.php?t=821742&page=3
http://blog.varunkumar.me/2010/11/how-to-install-android-market-in-google.html

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.