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I don't think your argument attacks simulation at all. Take the n-body problem; it's analytic solutions that fail against it, not simulations. I have a hard time accepting any non-computability of physics when our computation devices are made out of physics. We can include it.
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and if the argument is that the universe is so continuous (as in, infinite precision) that it can't be simulated, then the issue is really with step 1 already ("the universe is computable")
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