Larry Osterman wrote about "Why is Control-Alt-Delete the secure attention sequence (SAS)?" back in 2005. The answer is so short that there is no real need to summarize it, although I am eliding a few side notes.
When we were designing NT 3.1, ... we needed to have a keystroke sequence that couldn't be intercepted by any application. ...
It turned out that the only keystroke combination that wasn't already being used by a shipping application was control-alt-del, because that was used to reboot the computer. And thus was born the Control-Alt-Del to log in.
So there you have it, the reason why Ctrl+Alt+Del was chosen for the secure attention sequence.
Most likely on DOS there was no real technical reason why you couldn't possibly have caught Ctrl+Alt+Del and used it for some other purpose, but nobody in their right mind would have done that in a DOS application since it would break so much of users' expectations of how their computers worked. Note that Windows 3.x (when running in 386 Enhanced Mode; I don't think it did so when running in Standard Mode, and certainly not Win 3.0 in Real Mode) caught and handled Ctrl+Alt+Del, which demonstrates that it could be done even when running on top of BIOS + DOS. Probably the code that did the grunt work for that was just a few assembly language instructions, hooked to the appropriate interrupt vector, which looked for DEL with the CTRL and ALT modifiers set, doing a bit of magic if it found that particular combination.
As for simulating it, I'd go with "why would you want to?". I do recall reading somewhere (maybe it was at Larry Osterman's blog, maybe it was somewhere completely different) that technically the secure desktop is a separate session started and maintained by the Windows initialization code, and thus inaccessible to any non-privileged process. That said, apparently there is a SendSAS() function in SAS.DLL (which on Win7 is in System32) wich will simulate the user pressing Ctrl+Alt+Del; see SendSas Step by Step for a short code example. Caveat: I haven't tried that one myself.