Cornsail,
Let me try this one out on you; I don't know if it will help, but it might explain more how I envision this.
Again, I don't know how possible such a scenario could be, but we are really just using it as a thought experiment.
So, we try to create a simulated world. Let's say we start with a very simple set of commands that simulates a particle. That tells the comuter which gates to open and close. We repeat this simple instruction many times and we have another set of instructions that tell this simulated world what the 'laws of physics' are. So, there is very little coding going on here.
Those simple sets of instructions tell the electrons (in the actual computer) where to go and in what sequence. If motion is introduced into the simulated world, then the simulated particles should interact according to the 'laws of physics', again just a few lines of code. But shouldn't those simple few lines of code be able to produce all sorts of different changing ways that electrons (in the actual computer) move through gates as the 'particles' interact? The code won't be growing, but the way the electrons move through the gates will change over time according to the rules of the game. Now assuming that we were God and could recreate our world precisely, knowing all the contingencies, we should need just a few bits of code to ensure that things happen in this universe just as it did in 'the real world'.
What I imagine is a similar pattern of those electrons passing through gates that match what occurs in someones brain with ions passing through channels, etc.
If a brain can produce consciousness through physical means, why could not a computer? The difference I see is that the "rules of the game" simply come from different places -- in 'the real world' we speak of them being inherent to the universe, and in the computer simulation they are imposed from the top-down.