Probably not using a Java VM, but a Minecraft-like game would be doable e.g. using GNU gcj (Java to native code). E.g. the PS2 (32MB RAM + 4MB VRAM, 294MHz R5900 2-way IoE w/ SIMD + 2 x VLIW VUs @294MHz, with massive fillrate capabilities) is more powerful than the PSP (32MB RAM -plus 32MB extra for disc cache in some models- + 2MB VRAM, 2 x R4000 1-way @133-333MHz 1-way IoE -main and aux-), and there is a Minecraft clone for it called "Lamecraft" [1] :-)
gcj does not do what you think it does. It compiles ahead of time, so you get rid of the startup time and the warm-up time that plagues Java applications. But the code produced is just as GC-happy and memory-intensive as before. So the steady-state performance of gcj binaries vs JVM-run .class files are about the same (or somewhat worse for gcj binaries).
The performance of gcj would have to be equal or worse than the jvm almost by definition as it would lack the ability to do optimization at runtime in the way the HotSpot VM does.
