Maybe there's a small human inside the human's brain, not understanding the rules the human is following, and it's only the innermost human that is really conscious?

I think Searle's Chinese room argument is absolutely nonsensical, a bit like arguing about philosophical zombies. It's an argument that only makes any sense if you already are committed to mysticism or dualism.

> Maybe there's a small human inside the human's brain, not understanding the rules the human is following, and it's only the innermost human that is really conscious?

That would be the materialist idea of there being no soul, consciousess etc — just complex biochemical processes happening in matter. This is however not a satisfying answer usually because it fails to explain the consistent experience of ourselves, the worlds we can imagine, remember or think about, the feelings that haunt us etc.

If there is only material, where is our consciousness? Apparently our consciousness somehow emerges from that material, but how would a conscious computer then look? Would there be a difference between a computer that simulates conscious behaviour and one that shows the same behaviour but actually "has" conscious in it somewhere?

Yes, which is why I say that the argument is circular. It assumes its conclusion.

Either a computer program can "understand" Chinese or it can't. If it can't, we're done. If it can, then having a non-chinese-speaking human simulate the program won't cause it to stop understanding Chinese.

The presence of the human doesn't expose a contradiction in the assumption "a computer program can understand chinese".