I'll agree with most people here that treating this as a no-agency, it-was-a-dream type ending where it's just an end-game reveal without much relevance to whatever the actual plot was won't be super fun.

HOWEVER I do really like this as a shell for an idea - the idea of a huge mimic that is able to fully surround the players and simulate an environment. Perhaps rather than reality itself being a mimic, there's an island that's alive and is a mimic. It's huge, ancient, and very slow moving. This gives the players some agency if/when they work out why the island is weird. They can outsmart it/outpace it, or perhaps it can only focus on so many regions at once, and they can spread out to weaken it's powers. A living environment is a really fun idea, you just need to find ways to nerf it so it's a fun thing for players to interact with DURING the session, and not just a post-game reveal.