How can I install iPhone Simulator 4.2 on Xcode 4.2?
Download xcode_3.2.6_and_ios_sdk_4.3.dmg
(note - you need a developer account to access this software. I have instead linked to an open-to-the-public Apple discussion that contains the direct download link
Mount the .dmg file
Inside the disk image there is an invisible "Packages" folder. To open it select "Go to folder..." command from Finder menu bar and digit the path "/Volumes/Xcode and iOS SDK/Packages/"
Now double-click "iPhoneSimulatorSDK4_2.pkg"
Click into the destination disk and a button "Select folder..." will be revealed
Click the above button and select your "Developer" folder
Install the package, and Restart Xcode.


This will install the Simulator 4.2 SDK (both iPad and iPhone) inside the folder  "/Developer/Platforms/iPhoneSimulator.platform/Developer/SDKs/"

Now inside XCode 4.2 you can select this simulator from the menu.

Bye.