> A simulation, at least as we'd understand it, would mean some kind of set variables and set rules. It would be entirely deterministic

Why would the simulation be entirely deterministic? The simulations humans run often are not, see e.g. Monte Carlo simulations [1]. Also, the laws of physics as we presently know them are not completely deterministic either [2].

[1] https://en.wikipedia.org/wiki/Monte_Carlo_method

[2] https://en.wikipedia.org/wiki/Measurement_in_quantum_mechani...