What about the equivalent of foveated rendering? They're only simulating the bits conscious observers can see, the rest is ...not simulated to the same level? I guess you're kind of going there with your model within a model thing. If we are the point of the simulation, there doesn't seem to be much reason to simulate much beyond the planet besides what little astronomers can work with? Gonna crash this thing with enough players!
There's a weird SF story that has blood cell sized intelligences and reality starts to break because there are so many observers on such a small scale that reality can't change without being observed and then they all "poof" into another dimension or something and humans are left alone again. Anyway, the number of players crashing the simulation made me think of it. Blood Music by Greg Bear.