Yeah, you can't control arbitrary world programs that way, but remember that our world really is like that: a human mind runs within the same universe that it's trying to control. One idea would be to define a class of "fair" world programs (perhaps those that can be factorized in appropriate ways) and care only about solving those. But I guess I'd better wait for your writeup, because I don't understand what kind of formalism you prefer.
Some people on LW have expressed interest in what's happening on the decision-theory-workshop mailing list. Here's an example of the kind of work we're trying to do there.
In April 2010 Gary Drescher proposed the "Agent simulates predictor" problem, or ASP, that shows how agents with lots of computational power sometimes fare worse than agents with limited resources. I'm posting it here with his permission:
About a month ago I came up with a way to formalize the problem, along the lines of my other formalizations:
Also Wei Dai has a tentative new decision theory that solves the problem, but this margin (and my brain) is too small to contain it :-)
Can LW generate the kind of insights needed to make progress on problems like ASP? Or should we keep working as a small clique?