Even though I do not believe this to be possible, just for the sake of argument, there are a lot of factors that have been left out.
We assume that this simulation device would be nearly impossible, due to the massive requirements in processing power and speed. If this were, in fact, a simulated reality that we currently live in, who's to say that one second of our time is equal to one second in 'their' time? Just because we feel as if we've been in Wal-Mart (ugh) for 10 minutes, doesn't really mean that we really have. The simulation device could be operating on a different (if not changing) time speeds, when comparing this so called 'real universe' to the 'virtual universe.' In addition, it could be possible that there are multiple machines running in parallel.
Also, you must be aware that there are other processes for computation and storage other than our current-day 'conventional' machines. Such include, but are not limited to;
http://en.wikipedia.org/wiki/Optical_computer,
http://en.wikipedia.org/wiki/Quantum_computerand
http://en.wikipedia.org/wiki/DNA_computing. Also, we may think of our universe as infinite, but perhaps that is only what we see and think, when it is in fact finite (and conveniently stored on someone's futuristic hard disc, might I add).
As for software glitches and errors; how would we know what is a 'glitch' or just a part of our virtual environment? Perhaps once we see a glitch or error, it is fixed, and memories of it are suppressed.
Having spoken 'pro-theory' on all of this, it would be very hard to prove or disprove this theory, since you would have to obtain proof of this so called 'administrator,' or -dare I say- 'creator.' Thus it would require an amount of faith to believe in the administrator, the system, and everything else. It, quite simply, is a theory that can not be proven, and as far as we're concerned, this is reality. If it is true, we probably will never know it, as I doubt a huge windows dialogue will open up that says, "CONGRADULATIONS: YOU HAVE WON THE PRIZE."
In addition to the need to store data on personalities and all of that whatnot, do not forget that it would (possibly) also have to include both humans and animals.
[derail] Emotions are caused by chemical reactions in sections of the brain. These chemical reactions occur in response to surrounding environment, to our 'hardwired' instincts, and are often involuntary. The brain has special sections for each process, and just because it is a physical biological process, does not mean that it can be controlled that easily. Not to 'degrade' emotion, but it is true. [/derail]
btw... if it is true, we need pray to the great administrator to give us agents and cool stuff like that

I can't wait for the day schools get the money they need, and the military has to hold bake sales to afford bombs.