The same argument was used when the VCR came...

The music industry too. Just think of how easy it is to rip CDs, or burn digital copies of albums onto a CD. Even with a legit copy you can make copies.

Yeah, and no one buys albums anymore. 

Technically if you download a ROM, you're a pirate and that's all there is to it. Ignoring technicalities however, there are games that are either very hard or impossible to obtain, or perhaps that's the case with the hardware required to play the game. In such cases, there's no harm done by downloading a ROM. Then there's some morally grey areas where you can get both the game and the hardware, but the price is steep and the rightsholder isn't selling the game anywhere in any form. If you download the ROM, I won't judge you but some people probably will, and technically you're a pirate.

As to how you're supposed to play the game: You're supposed to get a proper copy of the game and then dump the data on its storage medium. Then you can use that data with your emulator. Of course for non-disc-based games, this is practically impossible for most people, but for disc-based games, the process is trivial.

What use is preservation if you can't experience the preserved experience? Games are meant to be experienced, and small inaccuracies don't take away from the experience. Horrible performance however does. As far as I'm concerned, physical storage media isn't important either in preservation because games are essentially just software. I'm not saying physical things shouldn't be preserved too, but that's extremely unpractical for many so preserving them is probably best left to museums and such. One point of preservation, to me, is to let people experience old stuff themselves, and considering how easy preserving software is compared to preserving hardware, I'd say the current situation is pretty much fine.

Emulation doesn't take any money from devs, and emulation itself isn't harmful in any other way either. Quite often emulation involves piracy however, and piracy reduces their income somewhat, but that 'somewhat' is probably a very small amount. Emulating modern hardware requires powerful hardware that's not cheap, so that alone limits the damage done by piracy. Also, probably only a fraction of those that own hardware powerful enough actually use emulators, and of them, not all resort to piracy (although I imagine most of them do). If I had to guess, the number of people actively emulating any given platform is at most some hundreds of thousands, which is but a small fraction of the total users of the system. That's just not enough to do much damage to any more or less popular game. In all likelyhood, the damage caused by emulation-related-piracy is at worst a minor nuisance. The biggest issue is the loss of exclusivity instead of lost income, and I don't personally consider that an issue at all.

I guess the memories I have of buying albums earlier this year were just false memories implanted into my brain

I'd say that the physical aspects should be preserved digitally to, for example I think that there should be scans of the cover, the back, the disc and even the manual in order to fully preserve the game, because those are part of the history as well.

Well, I guess I got to get on with that then

You're imagining things. 

Well, I guess it just happens sometimes.

Exactly. The danger for the industry has never been copying of material, but rather the industry's inability to adapt to new times. Now that companies has realized the strength in digital distribution, they are making more money than ever.