There is a lot to unpack in there. But, as I became an atheist (I wasn't raised that way, but evolved as I slowly realized the nonsensical nature of "scriptures"...and the blatant errors in logic and science), it really condensed down the problem for me.

Ultimately, there is no purpose to life. A purpose implies a design, which implies a designer. And we have no evidence, or even a logical reason, to suppose that there is one. So, there is no purpose to life. Though, on an individual level, you give your own life your own purpose on your own. Is it to be happy? To help your fellow man? To help the environment? That's entirely up to you. There is no reason to believe there is anything more to it than that.

I am aware of the argument for our reality being a "simulation". Again, without evidence or a logical reason, there is no reason to believe that. Yes, it is conceivable (and I am familiar with the "odds" argument). Like Russell's Teapot, you have to provide compelling evidence or I will remain a skeptic (and default to "no, until proven otherwise").

As for "what is reality"? That gets very hairy, since almost everyone will dive into quantum mechanics at some points when discussing that. Even if they don't understand QM. (I was a physicist, so I can tell you most people who talk about it don't actually understand it. Heck, some aspects I won't claim to understand.) Distilled down a lot, one could argue that this universe is a collection of fields that manifest the various observational phenomena that we see/observe/measure.