Saying "within the simulation", begs the question and rather makes a mess of the issue.

The question is, at the outset, whether simulations are actual instances (eg., of thinking).

My claim is that they are not. Only when a human being looks at a simulation does it inform them of the target. The simulation isnt the same thing as its target.

There is no "within the simulation". A simulation is just an abbacus. A digital computer is just a fancy abbacus with a wood-to-LCD converter attached.

There is no "within the wood". It's just wood.

My claim is kind of orthogonal, that “actual instances” is a red herring and that the only thing that matters is observational equivalence.

Yes, but you're defining "observation" as some weird intra-wood process (, intra-silicon in the case of digital machines).

Observation means, for example, reflecting some light off the thing. Does a piece of silicon become transparent if I program it to model glass? No.

So, trivially, it is observed immediately not to be equivalent.

What you mean by "observation" is: can a person using the model system inform themselves of the target.

Do I get the message "lets visible light through: 98%" from the machine when I have correctly modelled the glass.

That message isn't observation, it's calculation. Calculation is what happens when I use a tool to inform myself about something.

That the machine emits the right symbols in a way that it is programmed to, so that I acquire accurate beliefs about the world, says nothing of the machine. The machine does not become transparent.

Please do explain how you would test whether you are being simulated or if you're an "actual" instance.

As in, perhaps there's an outer universe where our hairiest quantum physics are trivially solved. They are simulating a very simplified universe model, and everything we see is already simplified.

If you can prove it, you're far more clever than me. If you can't, then being "actual" seems to have no practical use.

I like how you put that. The abacus and the computer are the same in that the consume external power, and adhere to a set of rules. But there is a large difference between an abacus and a computer. A computer can modify the program that is running. It can change its own rules. An abacus cannot do that.