Yeah, I'm not advocating the simulation hypothesis as such : ) I'm only saying it fits here nicely as a thought experiment (that's why I emphasized: "for argument's sake"). Its actual correctness is beyond the point.

As for the validity of simulation hypothesis itself, I'd say it's essentially religion in disguise*. It's unfalsifiable by definition too, and personally I apply Occam's razor on the idea, but obviously I can't disprove it. The question can't be "is it true", but it's fine to ask "is it a useful (or at least thought-provoking) metaphor?" (in a given context).

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* Most religions, in my view, can be broken down to the sum of: a) simulation hypothesis of sorts (universe run by Creator), b) code of ethics with mnemonic narratives, c) ceremonies, that covers most of it analytically speaking.

The universe working on a computational principle no more entails it being a simulation than the previous "mechanics" based physics entails it being a machine. Its an unfortunate fact of language and history that it is hard to express the idea of "digital physics" without misleading people into a quasi-scientific secular form of Gnosticism (aka: this is the simulation, the real reality and motivations of the people behind it are hidden from us).