Here is a promising looking Soft Processor core available on OpenCores.com. It looks like it has some nice simulation and debugging tools built in – as well as a C toolchain.
Included with the package is oldland-rtlsim, which lets you simulate the processor on a PC. The oldland-debug tool lets you connect to the processor for programming and debugging over JTAG. Finally, there’s a GNU toolchain port that lets you build C code for the device.