Your premise has multiple flaws. Virtual reality doesn't require simulation of the entire universe, but only one tiny corner of it. Even that corner doesn't require a complete simulation, but simply what one observer can see and hear.
And even that doesn't require mathematically perfect results, but only less error than a human's sense organs can perceive. We're not that far off today.
Your premise has many flaws too:
1. MS Flight Simulator is trying to cover our entire planet. Is that the "little corner" you talked about? Imagine if you could step out of the airplane, enter all the houses, move objects in the houses, driver cars, etc. On the entire planet. Now... that would be the biggest free roaming game ever made. And I'm pretty sure it's out of the reach of our modern technology.
2. Now, let's expand of that. We'll create a sim world out of little spheres, which are much larger than atoms, molecules, viruses or even bacteria. Let's make them 0.1mm in diameter. That's barely visible to the naked eye. Now, imagine a medium-size city, like Stockholm, but without suburbs. That's approximately 28 km2. Let's say that we destroy all the houses, all the things in those houses, all the rocks and trees in parks, all the cars, all living creatures, everything in that city. We turn entire city into powder. It's safe to assume we would get at least 10cm layer of dust and material, covering those 28 km2. That's the stuff that makes entire city. Now, let's convert that stuff into our little spheres. 28 km2 x 0.0001 = 0.0028 km3. Which is 2,800,000 m3. Which is 2,800,000,000,000,000,000 little spheres (0.1mm in diameter).
Good luck finding a computer that can compute collisions between those spheres. Even just storing that city would be futile with our modern or near-future tech. For each little sphere you need to store its 3D position, speed vector, color, reflectivity, transparency, and various coefficients of the physical forces and properties supported by the sim engine. Let's assume that's just 64 bytes per particle.
To store Stockholm (without suburbs) you'd need 162,981,450 terabytes. And that's a working model, so this would be in RAM not on SSD.
Good luck rendering that model using ray-tracing, even using the best continuous LOD-reduction algorithms.
BTW, the above calculation didn't take ground into account. But the simulation should simulate at least 50cm of ground, so you can dig a little hole in it. Although graveyards wouldn't look good with only 50cm depth.
And of course, that was just Stockholm. But a massive multiplayer game should be covering entire Earth. Where hundreds of millions of people could be building or digging in any part of the world. In parallel. And the results would be visible to everyone else. Instantly. So, how many SSDs do you need to store the top layer of our planet with 0.1mm precision?
And how fast those SSDs need to be, considering that world is being constantly updated. How much RAM do you need for the working model?
