I want to develop an app for the iOS app store, but don't want to invest in a mac since they start very expensive. So I considered running Xcode via VMware using OSX Lion on my windows 7 computer. Would it be legal for me to create and sell an app if it was created on windows? Is Apple fine with it? Selling it on Cydia or other jailbreak stores are not an option.
It is against the Apple and Mac OS terms of agreement to install Mac OS on anything aside from an Apple authorized machine. You are in breach of your user agreement by doing even that. So app-store stuff aside - you are in legal hot water.
However! Pushing that aside, I'd like to note at least one game has been published with a similar method as the one you have developed. If you see this article you can read about it.
The paragraph I want to quote is:
They developed on the PC but uploaded on a Mac Mini. But apparently others have uploaded via just a demo computer and done well.