Chances are whatever dimension is hosting our Universe server, is probably 4th or 5th dimensional.
Sorta how we can make a detailed 2D simulation like Dwarf Fortress. Our 3D universe might as well be somebody’s Super Nintendo.
Chances are that we’re not in a simulation, but you’re right that for our universe to be simulated, the host universe would need fundamentally different physics.
Even then, I feel like you’re underestimating the scale of the universe. Dwarf Fortress is laughably simple compared to a real universe. It’s a toy. You’d need something more than a couple extra dimensions for our universe to be at all comparable to that.