There's nothing inherently wrong with simulating intelligent beings, so long as you don't make them suffer. If you simulate an intelligent being and give it a life significantly worse than you could, well, that's a bit ethically questionable. If we had the power to simulate someone, and we chose to simulate him in a world much like our own, including all the strife, trouble, and pain of this world, when we could have just as easily simulated him in a strictly better world, then I think it would be reasonable to say that you, the simulator, are morally responsible for all that additional suffering.