Keil has made it for the LPC family on a bit level. The I2C simulation is monitoring the I2C SCL and SDA pins so the external device SCL clock streching, bus hanging, etc. can also be simulated.

With the help of the simulator user definable funstions, serial I2C EEPROMS, IO expanders, LCD drivers, etc. can also be simulated.

They don't use the virtual register based simulation but rather IO pin based simulation. (the bit I2C simulation was a work of 3 months for a high-professional developer).