Is it wrong to create a simulation and then torture the inhabitants? Well, that is an ethical question, whereas this is a meta-ethical analysis. But the meta-ethical answer to that ethical question is that if you torture simulated beings, then you must live with the consequences of that.

I should add that it is impossible to erase your sin by deciding to terminate the simulation, so as to "euthanize" the victims of your torture. Because there is always a branch where you don't so decide, and the victims of your torture live on.