It only takes one expansionist species to populate the whole galaxy. Thus, if intelligent life were common, we should detect them. You'd have to argue that no advanced species would ever do this, which is possible, but seems less plausible.

Some people do. Other people climb mountains or work on robotic rovers. There is no evidence that an entire civilization would choose a simulated existence, let alone every civilization. The evidence so far is that there would be ever increasing numbers of things to do, only some of which is simulated. There are plenty of young kids today training to become athletes instead of EA sports champions. Some people prefer to be outside instead in front of a screen.