The only problem I've had with it was that the simulator does not have access to your iTunes library, so code to run against the MediaPlayer.framework doesn't work. I've not had any cross-compilation issues.
My Mac has a beefier CPU than my iPhone, so you still have to test on the device to check performance. Same story with memory usage. You can simulate a memory warnings from the simulator UI for testing, but you want to make sure that on the device you are not hitting up against real limits to start with. In theory, the simulator doesn't have an email client in the background, so there is always going to be more free space than on the device itself, but in practice I've not had any problems - I don't want to be filling up memory anyway.
My Mac has a beefier CPU than my iPhone, so you still have to test on the device to check performance. Same story with memory usage. You can simulate a memory warnings from the simulator UI for testing, but you want to make sure that on the device you are not hitting up against real limits to start with. In theory, the simulator doesn't have an email client in the background, so there is always going to be more free space than on the device itself, but in practice I've not had any problems - I don't want to be filling up memory anyway.