You'll have to simulate the body and its environment to some extent anyway, because it's the only interface brains really understand.

Yes, but I would assume that the simulation doesn't try to mimic physical reality 100%. People probably will be able to teleport around instead of taking a 10 minute walk.

Engaging in hobbies like martial arts or dancing will be much different than it is at the moment.

Look at woman wanting to keep a certain weight to be beautiful to attract a good mate. Look at how guys go to the fitness studio to build big muscles to attract woman. All those physical effects are important for the way our society is made up.