The nice thing about such a game, unlike real life, is that it allows you to try out new things, and it's much faster. If I want to hang out with friends they have to be avaviable. If I want to try taking drugs, killing my parents and throw my lover off a huge tower, I'd have a hell of a life ahead of me. If I had a game, I could do it there instead, to vent frustration, to wreck someone else's life, to live vicariously through someone smoother than me in social situations, or whatever.
I think it could be fun, if done well. Of course, it wouldn't be too popular, and making a fully graphic involving game would take years of constant work, and it wouldn't pay off in the end, unless you made it some sort of open-source project and found people willing to work a lot. If it's not a completely exhausting, fully graphical game you're after, Kudos and Alter Ego fills the void quite nicely. The Sims might be worth mentioning to some, but to really get a life out of it, you have to buy like 30 games, and they're really not worth it, plus they add too many silly things, like robots and magic. I'd love to have it in real life, yes, but not in a life-simulation, then I just get jealous of the silly, poorly animated cast, which is kind of sad.