GDB or Insight across ethernet

That's exactly what is done. If you look at the BDI 2000, for example, it can communicate over a LAN in "gdb", and handles the details locally. As an example, consider reading a 32-bit value from memory on a ColdFire. That takes five 17-bit bdm frames. Each bit takes four operations (clock toggle, data out, clock toggle, data in) - you'd be talking about 340 Ethernet packets, not including acknowledgements. In reality, you'd be lucky if your download speed were measured in bytes per second rather than seconds per byte. With the gdb protocol, you'd send a single "read" command, and get a single data value back.

Absolutely. The easy way to do this for a one-off is to dedicate a small PC as your gdb server. I've done debugging from my home machine, with gdb running there connected to a proxy on my office machine connected to the target.