The SNES does something similar with the Super Game Boy, and it is surprising to me that the SNES does not have the memory bandwidth to run Game Boy Color games at full speed using this technique. Super FX games worked similarly and never ran at full speed, albeit they had larger dimensions.

But somehow the Game Boy Color itself can transfer a full screen's worth of tiles and their color palettes at what looks like 60 FPS. Quite impressive, really.