Ok well what I'm about to post is one of the popular theories on Nero's arm and how he carries the blood of Sparda. This is the theory I believe is the most plausible, whatever you all believe is up to you. Anyway, I believe Vergil is indeed inside Nero's arm. There are several things for me that point to this. The first would be he was able to repair Vergil's sword, the Yamato and call it to his hand. It responded to Vergil being in the area and in distress which is why it repaired itself. Now I know this sword belonged to Sparda, but like Rebellion being a representation of Dante's power, Yamato became a representation of Vergil's power.
The next part would be the statement by Nero that a voice inside his head echoed. "Power... give me more.. power." Now then, of course Nero wanted it to protect someone, however you could say Vergil's motives weren't all evil. His wanting of power originally stems from the trama of seeing Eva being murdered infront of him, which is also why he had many personality problems, like being as kind to other people as a stone. :P The next part of this general theory is that the floating image behind Nero is a combination of Vergil's DT from DMC 3 and his Nelo Angleo form. I'll post pictures down below to compare between the spectre and the two forms respectively. Now here's a few things to notice, the image has the arm sheath for Yamato which Vergil's DT had in 3. It also posses the same general body type, horns, facial features etc. For facial features I'm going on the horns, glowing eyes, blue tinted facial cracks and such.
Oh and one more thing, Nero when battling Sanctus says "Jackpot!" when he hits him for the last time, something Dante and Vergil always used to say. Just another interesting piece of information.
Here's a few comparison pictures... Starting with Nelo Angelo
http://i30.tinypic.com/3013lf4.jpg
http://i27.tinypic.com/24bsup4.jpg
Here's a shot of the spectre behind Nero upclose...
http://i29.tinypic.com/abq8ig.jpg
And here are two shots, showing the arm sheath comparisons I was talking about...
http://i230.photobucket.com/albums/ee114/macca3666/vergil2.jpg
http://i230.photobucket.com/albums/ee114/macca3666/Detail.jpg
Anyway, this is just a theory but I believe its true, what you guys would like to believe is up to you. Sorry if anyone gets upset by this whole thing XD Anyway, enjoy reading and looking hehe.
"Foolishness Dante, Foolishness. Might controls everything and without strength you cannot protect anything. Let alone yourself." - Vergil