It also explains why we have a persistent narrative of self: as a baseline to navigate an increasingly complex simulation space. Make a complex enough simulation, and the feedback from the simulation complex can rival the input from the sensorium.
Without that baseline, a "return to zero", the organism might have a hard time dialing back into its sensorium, barring cultural and technological improvements, before the actual real world bites off your entire body.
Which segues into the various ways this can go wrong: delusions, poisonous ideology, etc etc etc all the way to psychotic break, hallucinations - where the simulation space overwhelms the sensorium.
It's been pondered by others far smarter than I, but I often wonder if "AGI" - as the technophiles imagine it - is even possible without the mind being in a body.