Given the subject matter, I wouldn't pop this in the intelligent discourse pigeon hole, however your point is well taken.
Granted, from a purely logical viewpoint this city wouldn't work, but that's not the challenge. The challenge was to beat Sim City 3000 and he did that. Think of it as trying to get the highest score in Pac Man or Super Mario Brothers. There are competitions on that! And from one screenshot from the videos, it seems as though there are competitions for Sim City 3000 too.
Yes this city wouldn't work in real life. The subway system would be prohibitably expensive; getting all the power from neighboring cities wouldn't work; having groups of buildings to satisfy a citywide requirement wouldn't work. Yet he beat the game. That is all.