Potentially, though there are other solutions that could be used. There was a product they used a while back during the transition to x86 architecture that did code translation, for example. https://en.m.wikipedia.org/wiki/QuickTransit

That would work with user-space extensions, but would it work in the kernel?

That was and still is an impressive piece of code. Another more recent one is the RPCS3 PS3 Emulator, emulating the async PPC cell chip on modern x86 processors.

(Better known as Rosetta, when Apple licensed it.)

Yes, absolutely.