If we run in their VM, then the Fermi paradox still applies--since physics is consistent in this VM and seemingly leads frequently to life, why wouldn't we see signs of it elsewhere in the galaxy?

If the "we're like ants/barnacles to them" theory is true, then they wouldn't bother intentionally hiding from us, because we're no threat to them. If they do it unintentionally, that would still be interesting: for example, it would probably mean that civilizations do not in fact aggressively colonize the galaxy.