I think both of you have pointed out the pros and cons of the simulator and it is up to the potential user to know the limitations / benefits and use it properly.
Hence the key thing would be to first know the limitations of the particular simulator thoroughly even before thinking of using it.

Accepted ICE does what a simulator does and much, much more- but the issue is one of affordability - particularly for people who want to start fresh and for non-commercial purposes.

The "it works in the simulator, but not on the chip" scenario is often a very useful hint in distinguishing hardware & software bugs

A new perspective to an old scenario. Great !

Raghu