Earlier quoted context omitted.
Except that your mind is not an isolatable computation - it is influenced by your body, which is in turn influenced by its immediate environment, in turn influenced by the rest of the universe in an ever expanding nested fashion. So if you want to simulate yourself, you have to simulate the universe.
well, the upper bound for the amount you'd have to simulate would be smaller than the universe, you'd only need to simulate a volume containing all particles that could causally affect you within the duration of the simulation, which would be limited by lightspeed. But I think, even then, you could simulate distant stuff at far lower resolution than near stuff, in a way that dropped off in expense very very quickly.…
E.g. consider the game Elite. It creates an - admittedly very simple - illusion of a persistent universe by using pseudo-random numbers to generate star systems.
It then populates those systems with ships whenever you visit one. But those ships only "exists" when you are in the system. Leave it and they disappear.
That's obviously too simple, but the point is that most of what you see you don't interact with more than superficially: For most of the ships you have no way of knowing (other than by looking at the code...) that if you turn around and fly back to the same systems, the simulations you run into are new rather than have just moved.
In general, you would be able to discontinue and discard most simulated objects after varying amounts of time. E.g. you may need to be able to regenerate a beach the subject has visited so that it looks the same, but only hours afterwards you can discard the sandcastle the subject built.
In fact, I'd argue that one of the problems with some open-world simulation games today is that they permanently retain state they shouldn't. E.g. if you chop down a tree in Minecraft and leave a stub, it will remain there forever. This is made worse, because the single player version and most servers will only simulate chunks where there are players - other chunks will be "in stasis", so if you quickly leave an area, states that even in-game should be brief and temporary gets frozen in time and restarted long after they should have changed if the player later comes back.
A "perfect" simulation will continue simulating any area "touched" by the "players", but over time gradually erase those state changes: Stubs rot, area overgrown etc.; buildings fall apart.
Over time you can let state left behind by a player converge on a generator function that lets the simulation eventually discard the state change entirely and fall back on just generating the area on demand.