Many of these old games use a "sprite sheet" or "sprite page," basically just a big bitmap with a bunch of little sprites in various stages of animation. Do a Google Image Search for "sprite page" to see what i mean. If this new technique were added to an emulator, could it "prescan" the ROM and run the vector trace while the game is loading up? If performace of all of these vector lines animating at once is an issue (think flash animation), the emulator could just temporarily rasterize the vector trace at a much higher resolution, so you're moving around high-res sprites on the screen.
I redraw bitmaps as vector art as a little side business, and I have to say this is the best "livetrace" automated program I've come across. Shameless plug: Vectify.com. Still no substitute for hand drawn (rounded corners that should be sharp; variable, wobbly line widths; but very good for an automated process). I've scanned through the PDF paper, and it looks like it's too CPU intensive to be used in retro games in realtime: from page 6, "There are many avenues for future work. Obviously, it would be nice to optimize the performance of the algorithm so that it can be applied in real-time in an emulator." As someone who used to play old games via dosbox and SNES9x, having something like this as a selectable filter option one day would be welcome. Now that I think about it, this kind of thing would be useful for app developers who want to scale up low-res artwork to work on higher res displays (like going from the original iPhone to the iPad). At least, it could be used as a starting point to further manual refinement.