Potentially. Douglas Adam’s imagined a lot of weird shit, and was also good at combining words in ways that drove imagination in the readers even if he didn’t have any specific thing in mind when written.
His words here could be taken to mean “God” didn’t want to be known/understood, like the Tower of Babel.
Unrelated to the previous, the Elder Scrolls mythos contains a sort of transcendence concept called CHIM, which involves coming to fully understand reality and the person’s relationship to it. Since that reality is, according to at least some, a dream, that means accepting that you are just a part of a dream. Managing to fundamentally internalize that without winking out of existence is apparently extraordinarily difficult. All that to say, perhaps a similar mechanic could drive the “dream” to reset itself, or start anew.
Yes and no. Nothing that we know about the universe preclude it being a simulation, so learning only that it is a simulation is more expanding out fundamental understanding of the universe. However, as things stand, we are pretty damn convinced that nothing violates causality while following the internal rules of the universe, so if the genie did that without invoking some power we might call “outside the universe”, then we learn that the universe can internally violate causality - THAT might destroy our fundamental understanding of the universe.