And yes, the "plot twist" was poorly handled. I think the developer got carried away and broke from the original idea when they slapped the "online game" aspect to the final town. It was probably done late in the development (to add minigame and sidequest), and wasn't intended to be like this. It would explain the contradiction between npc text, database and the story.
Anyway, creating an universe within another universe is something that could happen, and controlling it with super computer could works. The whole concept isn't farfetched from a physics standpoint when you looks at it this way.
If you want to ignore something about SO3, ignore the "gaming" part, and just consider the Eternal Sphere as an artificial universe built using advanced physics.