I designed a device that can simulate very well a fireplace. It needs 120V light bulbs (or anything that is dimmable). We can use one set of red lights, to create a deep-red background (not dimmed), plus one set of yellow and white lights (or anything else you like) that will be flickering according to the fire-cracking noise. In fact the device comes with a small (but loud) amplifier that plays the sound of an actual fireplace (downloaded from youtube: there are tons of them), and the yellow and white lights will flicker in unison with it.

110VAC/220VAC versions:

Virtual Fireplace
Virtueel Haardvuur
Virtueller Kamin
Feu de cheminée virtuel

The audio file is stored in a memory card and played by means of a mp3 module TENDA TDB380. All these goods are managed by a tiny Microchip 12F683 (8pin) and two triacs. The red lights are connected straight to the mains, the yellow and white lights are driven by their respective triacs. A LM386 drives a 8 Ohm loudspeaker (approx. 500mW). There is a trimmer to adjust the volume.

The board fits also the transformer, so nothing else is needed. For your convenience, here is a video.
 

The firmware has been written using mikroC free edition (it's less thank 2k: actually 208 words).

IMPORTANT: suited for North America's grid (120V, 60Hz). DO NOT use anywhere else, since the timings won't work correctly.