Can a computer simulate anything, or is there a thing, or process, that a computer theoretically can never simulate?
Can anything be reduced to ones and zeros, even human intelligence?
Pretty much.
The universe is a mathematical object, and as such can be simulated.
Basically, anything you have a description of can be simulated.
Two problems here, however.
One, we don't have good descriptions for everything so far.
And two, the simulation speed is not going to be particularly fast.
Compare Bochs and VMWare, for example - one runs slowly, while the other runs fast.
The first is a full emulator, computing the results of every instruction of the PC architecture. It would run the same on a completely different CPU.
VMWare, on the other hand, is virtualization. It uses the host CPU to directly execute most instructions, and only computer the privileged ones. So it's much faster, but won't run on a different kind of a CPU.
In the same way, you can compute the protein folding, for example, on a regular computer but it would take you months while in the test tube it would fold in femtoseconds.
However, a not-quite-invented-yet quantum computer would be able to "virtualize" the computation by using the universe's "instructions" directly, and compute the folding in minutes or seconds.
So, the closer the simulated thing is to reality (defined as the host medium), the easier it is to simulate.
The consideration of "universe is a simulation" is, in my opinion, no better (or worse) than the consideration of "religion", it's a philosophical debate, not one of scientific rigour.
Perhaps, but it opens up the idea to look for "bugs" in the simulation, to look in the places you won't ordinarily bother to look, to consider what consequence this might have, and so on.
At the root of science is coming up with the ideas, which are then to be tested, falsified, developed and so on.
But if it never occurs to you to, say, check if the space is actually perfectly flat everywhere, then you'd never falsify that hypothesis and enable understanding of what we know as general relativity.
Philosophy is quite important in that regard, since it lets you look at things from different angles and can help to notice something interesting.