@gtluke -
I think there are a lot of assumptions in your post that you take for granted.
Example: On what basis do we assume that our perception of reality is reality? Suppose that we are a simulation. This simulation is governed by some rules. And these rules are presumably a subset of the "real" rules that the people who started the simulation live by. On that note, your cascading simulation is governed by the ability of 1 simulation to simulate their own simulation.
Now assume that we are not a simulation. Why do we not have the same problem? Why do we assume that all the rules we observe are the real set of rules? Suppose, as an example, that there is a whole level of existence that exists faster than the speed of light. This makes no sense, but is it because it's non-sensical or because humans are too limited to understand it?
Suppose the simulator is an actual god. No matter what answer you come up with in this whole scenario, it begs the question of a god. Because if you go back enough simulations, there has to be Simulation 0. And what started that?
Further. Imagine a bunch of 2D insects that live on a sheet. Once a year, Bug Masters roll the sheet into a roll. And on that day, the 2D bugs can walk in a straight line and end up where they started. They think it's magic. One day those 2D bugs manage to create the paper roll and so they can walk in a straight line and end where they started every day. They think they have created a simulation that is as good as the yearly hand of god and post on a message board that they must be living in a simulation because they were able to create what the Bug Masters did. The Bug Masters laugh at this because the 2D bugs understand almost nothing of the "real" world. They don't even understand cake. The bugs are idiots.
Are we 2D bugs? Maybe. But I think we delude ourselves that we think we can understand and perceive what reality is, to an astounding degree. We think we have incredible technology but in the grand scheme it might be the same as rolling a piece of paper in a roll.
I have no idea if the world is infinite. I think that time may be relative. This whole universe could be an imagination in the brain of some dying being, and it is happening in between the time its heart stopped and the oxygen supply to its brain has run out. But to us it seems like a billion-billion years.
If you want it to matter, it matters - regardless if this is Simulation 0, Simulation Eleventy-Billion, or not a Simulation at all. If you refuse to play the simulation, you'll end up broke, homeless, and living on the streets of Newark begging for simulated D&D coffee every morning outside Newark Penn Station.