I think the assertion that you have to simulate the whole thing is somewhat self-obvious, and I'm not physicist, but I'll try.
Take the "window" of the Earth. Without simulating the rest of the solar system, there is no way to account for the gravity effects of the larger planets, the energy from the sun, the occasional impacts from asteroids, the high-profile fly-bys of comets like Halley's, etc. Without simulating the rest of the universe, what would the simulated-astronomers on your simulated-Earth be looking at when they peer into their telescopes? What happens when you fast-forward far enough into the "future" that the Milky Way merges with Andromeda?
You can't simply hand-wave these things away by saying, "well, we would ray-trace the things that are observable" because you have no way of knowing what is observable without simulating the whole rest of the universe too. It's either simulate the whole thing, or your simulation is very limited and inaccurate.
If you are mainly interested, in what happens with people, accuracy of the rest of simulation is not important, you only need to simulate the parts people see with the resolution they can see, you even can have lots of inconsistencies as long as they are not reproducible.
the problem is the world is chaotic: any approximation, no matter how small, will cause divergence very quickly. (This is actually the main problem with the simulation: how did they get the exact initial conditions and physical constants?).
Take the "window" of the Earth. Without simulating the rest of the solar system, there is no way to account for the gravity effects of the larger planets, the energy from the sun, the occasional impacts from asteroids, the high-profile fly-bys of comets like Halley's, etc. Without simulating the rest of the universe, what would the simulated-astronomers on your simulated-Earth be looking at when they peer into their telescopes? What happens when you fast-forward far enough into the "future" that the Milky Way merges with Andromeda?
You can't simply hand-wave these things away by saying, "well, we would ray-trace the things that are observable" because you have no way of knowing what is observable without simulating the whole rest of the universe too. It's either simulate the whole thing, or your simulation is very limited and inaccurate.