The chance that we are in an ancestor simulation is in the neighborhood of epsilon.

I also put the chance for an ancestor simulation in that neighborhood, I just don't give a high probability that my best guesses on the topic are actually sound and that skews things a little. ( as in 'There might be reasons why a simulation-capable society would run more ancestral simulations than other kinds of simulations even if I haven't thought of those reasons yet')

All the arguments which imply that we might be living in a simulation would imply that the universe which is simulating us is also a simulation. I assume there's got to be a ground universe somewhere in the chain.

Yup, there must be a base universe but it is possible that the inhabitants of the base universe have also done their math and also reason that the chances are higher for them to be in a simulation (even though they are actually the only ones(not actually sure about the 'only' bit) that are not in a simulation).

An extreme Singularity doesn't seem necessary to get a lot of simulations.

Not an extreme one, no. Still, you need to have passed a certain level to be able to run those simulations and you can progress your civilization a lot more just from information that you gather from such simulations which in turn would logically lead to an 'extreme' singularity. (exponential growth and all).