It's got as much merit as any other faith based theory of existence.

We see things that don't seem to make any intuitive sense in science, and simulation theory is one explanation, but without any evidence (and really, there can't be evidence against, because it faces the same response of "any evidence against is explicitly put there by the simulation").

Simulation theory is essentially science-themed religious theory rather than directly evidence based theory.

I'll admit it's a fun "why" as to the weirdness of quantum mechanics and relativity, but ultimately the hard science folks I respect confess they are just finding models that predict stuff accurately, and the various extrapolations to intuitive neat things people make up in that context are beyond the realm of "science" (simulation theory and many-worlds interpretation of quantum physics are the biggest ones I can think of).