I saw a YouTube video where a guy was showing off his hacked 3DS and a had a PS1 virtual console in his library, was that fake or is it actually possible to have custom virtual consoles with Homebrew?
As the other guy said, yeah, it's real, and, yes, custom virtual console games have been around for a while now, and they're called injects.
However, having alot of PS1 injects in particular will take up A TON of space on your SD card, several gigabytes atleast.