Yes, it's very close to cellular automata, with a few tweaks to make it easier to program. You are quite right about the debugging situation with growth of rules - I've some plans about this, but it will probably require more screen real estate than the 160x120 MakeCode Arcade screens offer.
I've done experiments with this almost twenty years ago, and it's surprising how much can be done with simple rules.
However, it can also be difficult to debug when you have a large amount of rules.