I find the theory full of holes...
1) Just think about the amount of power needed by a system to maintain such a virtual world
2) Consider the magnitude of the power needed to further maintain a nested system/S within itself???
[....besides.. i doubt amazon ec2 could scale this kind of thing anyway \)
Well, nowadays philosophy is often meaningless. But I think it's a good exercise only to train our mind to think about non-conventional theories. Probably it's a lite version of 'What you can't say' http://www.paulgraham.com/say.html.
Evidently, it's a question whose answer is unreachable and, in my opinion, completely irrelevant (i really don't care if there is/isn't god, if we are a computer simulation, or if I'm a potato).
[....besides.. i doubt amazon ec2 could scale this kind of thing anyway \)