I'll try to break this down one by one.

>Many video games are essentially simulators of things that we're prevented from doing in reality, because of the laws of nature or society. Whether that's dropping blocks into place, building a city, chasing and eating ghosts, flying a plane, performing magic spells, or engaging in physical violence.

I've played a lot of ultra-violent games, puzzle games, adventure rpg games, competitive shooters and mobas and more.

I've become quite skilled in most of them (t500 in OW and GE in CS:GO, to compare to competitive skill levels). I really enjoy "mastering" these games. (for example finished Doom: Eternal on the hardest not allowed to die mode too). This is ultimately what it's about more than the killing of monsters/people. It's about trying to survive impossible odds by skill or competing with other people to be better and get better. Your mileage will vary as this isn't what other people want to get out of games. Some people enjoy managing a farm in games like Stardew Valley, building things in Minecraft, solving puzzles in Portal and enjoy the story and gameplay whilst doing so.

>And there's a never-ending push to make experiences more photorealistic, to make simulator even better. From that I can only conclude that people want to get as close to the experience of perfoming the prevented act as possible.

Making games look better goes hand-in-hand with making them look more 'photorealistic' or realistic in general. We're very much grounded in our own realities. So when you're going for a 3d experience that emulates real life events like wars. You will end up with something that looks more photorealistic. It doesn't however mean that the game feels real. Playing a game like insert recent AAA fps is a very different experience from watching the Christchurch shooting. The latter makes me sick to my stomach, the former doesn't at all. NPCs are ultimately just visual representations of people, the latter actual people.

>Chopping someone up is heavily frowned upon in real life, but perfectly acceptable to emulate in someone's living room. Somehow the simulation escapes the taboo. And that escape seems to be absolute: In the range of violent acts you could commit, from a gentle nudge to grisly murder, simulation of the most extreme extent is permitted.

It's a thought I think almost no one actually has when it comes to murdering people. Hell this might even have the same effect as pornography, namely a reduction in crimes related to it. (Porn availability on a societal level reduces the amount of sex crimes). So a potential murdering being able to 'chop "people" to bits in a simulation' might be a good thing. For me it has no effect, I've never had the thought of murdering people let alone how. At most I've had a "I hope you die" moment, and then regretting thinking that.

>But if that's the case, why is the realistic simulation of some societal taboos (e.g. physical violence to the point of murder) mainstream, but others (e.g. sexual violence in any of its forms) not? They are both very serious offences, but somehow one gets a free pass to let anyone pretend to do it, but the other not.

Though certainly not mainstream, this might also have to do with general taboos on porn, this could become a thing in the future especially with VR. A lot of people have very taboo sexual fantasies the they enact with partners. We know that this is the case, but it rarely gets openly talked about due to the former taboo mentioned.

>Is it a reflection on the ultimate limits of those taboos in the society that produces most of these games? Or is my logic broken somewhere?

I think your logic is indeed a little broken, as different taboos are taboos for different reasons. Hopefully I made some sense.