When does a "simulation" become a "reality"? I would assert that it occurs when entities within the simulation become sentient. "Becoming sentient" has libraries of books dedicated to the concept, so we won't decide that part in a message board, so I will assert for the purpose of this discussion that at some point it happens, and has happenned for us.
I assert that "reality" always is. Sims or MMORPGs have virutal realities, but there are no resident entities that comprehend that reality, or their place in it. The Sim or RPG world exists, they are realities that we've created, just that currently no self-aware entities of that reality exist yet (that we are aware of).
"Free Will" is a red herring argument. We humans appear to posess free will simply because we do not adequately understand the neural chemical and electrical reactions that take place. If we had total knowledge, it would be obvious that any apparent decission was nothing more than the predictible result of bio-chemical reactions. Where we are now, where everything is now, was innevitible the instant all this was started. This also eliminates the fanciful "multiverse" based on every decission ever made, since every decissions was pre-determined by bio-chemical reactions and were, in fact, not choices at all. This is not to say there are not other reasons or mechanisms that may create a multiverse.
Whether this reality is created or spontaneous, we are bound by the rules of the system.
All this brings up some grand theological issues. If we are in a simulation, then there is a creator. Are humans the point of this simulation, or are we simply something happenning in some corner of the experiment that is not important. If we ARE the point of the simulation, does the creator expect to be acknowledged? (Does a human scientist expect acknowledgment by the bacteria or ants being studied?). Does the creator alter the conditions of the simulation? Could we ever understand the criteria for change?