We are running a survey to help us improve the experience for all of our members. If you see the survey appear, please take the time to tell us about your experience if you can.
Well... you can already do this. The GNU tool chain can be built to run on ARM, and to output ARM. But you would need an ARM system running Linux.
...building a compiler based around binary translation of someone else's commercial product is probably against the terms of the license agreement =)
...what's wrong with GCC or LLVM, both of which can be compiled for ARM. LLVM in particular is pretty modular and you can remove optimization passes to make it smaller if needed.
*EDIT* One thing you can do to cut down work is write the compiler yourself, but emit assembler and then rely on existing tools to do the backend code generation. My toy compiler did this, using GCC's assembler to generate the ELF binaries.