Yes, we are effectively within a closed system of our sensory perception and the fuzzy larger world. Fuzzy because we don't know the details, but we see portions through media and experience.

Each fictional work is a simulation. The self perception could be simulated, so therefore it someday will be simulated. Assuming the progression of technology is as expected.

Seeming real is just a matter of having the grain of detail remain below what we can differentiate.