They're programs to compose music, typically they have an interface like this : http://en.wikipedia.org/wiki/ScreamTracker (Scream Tracker was a fairly famous tracker that ran under DOS). The Amiga / PC trackers usually worked with sampled sounds, but for instance the C64 trackers of course use the SID.
Yes. Several people have worked on such editors, including a friend of mine who made the sound for this intro : http://www.pouet.net/prod.php?which=13900. That editor has never really reached a usable state. First of all it doesn't optimize the tune (it allows you to enter duplicated patterns, which is ok, but it should optimize them away) and second it needs an emulator to play the sound, which is inconvenient.
It's neither hard to write a VST plugin nor is it hard to rip out the sound emulation part out of a 2600/7800 emulator (at least Stella and emu7800 are kept fairly modular), so that could probably be done quickly, although I think an editor that is tailored to Paul's music driver would be more useful.