Firstly, you would need one hell of a system set up, we aren't just talking mainframe servers in a building, we are talking entire city blocks dedicated to this

Firstly, you would need one hell of a system set up, we aren't just talking mainframe servers in a building, we are talking entire city blocks dedicated to this. The challenge is computing everything, you need to be able to work out the physics, smells, lighting, feel, taste, etc of everything the people would be interacting with, it's not as simple as virtual reality, where you are just wearing a headset, because in virtual reality, you know it isn't real. Then you would need some kind of advanced sedative, something capable of keeping the person relaxed, calm, but also allowing their brain to function at a primitive level, enough for them to be able to enjoy the dream, but not enough for them to come to their senses and realise that their world isn't real. After that, you would need a method of feeding the people, which would most likely involve intravenous tubes or some kind of stomach tubing system. Aside from this you would need dedicated medical units, to monitor the people but also to keep them healthy and save from risks such as deep vain thrombosis and sores. Then you would need synaptic plug in devices of some kind, to interface with nerves in the persons body, you need to find the process by which their brain gets input from parts of the body and receives output and put yourself in the middle of this process, taking the output, processing it on your machine to simulate whatever it is you require and then feeding that directly back in to the persons body as they would normally receive the input back to their brain. You would have to do this so efficiently that you would never fail, bare in mind that not only are you responsible for keeping them in this static state, you are responsible for keeping them alive, their lungs would likely be faulty from years of being driven by the machine, so if your oxygen delivery system has a wide spread failure you could lose your entire stock. These are just some of the challenges you would face. In short, yes, you could create that world and you could also populate it correctly, but it would likely be the single most difficult technological endeavour humans have so far faced (as a whole, instead of broken in to the individual requirements.)