I think you are trying to refer to PCATDs in which AC 61-126 was canceled back in 2008 and replaced with the BATD and AATD standards. The PCATD never allowed you to earn an instrument rating “just by practicing in a video game.” The PCATD which was tested by Embry-Riddle Aeronautical University allowed an Instrument student to substitute 10 hours in an approved PC Based simulator for the aeronautical experience required under FAR Part 61.65 Instrument Rating. (I am a U.S.-based CFI, CFI-I, MEI and there may be other rules with other countries. However, it is my general understanding that the PCATD was primarily a U.S. only effort, and few to no other countries allowed the use of PCATDs.)
Yes, CFI-Is generally prefer the use of the simulator, but it is not to yell. Removed from the aircraft you remove the noise, vibration, and other distractors of real-world flight and can concentrate on basic skills. So if a client is having difficulty in a particular area the BATD or AATD offers a solution that allows for focused training free of other distractions. The ATDs also allow for such things as freezing or pausing so the CFI-I can provide instruction free of a moving aircraft. Thus when the client makes a mistake, usually in buttonology with advanced avionics, the ATD provides a platform where the CFI-I can allow the mistake to happen, let the client see the result of the mistake, and then freeze or even back up the flight to allow the client to perform the task correctly.
As for the term “study level,” it was coined on a major flight simulation forum and picked up by semi-professional reviewers. As such it was applied to a product post-development to identify a product that in the opinion of the reviewer allowed the user to follow the procedures in an applicable operator’s manual and see real-world expected results. It was, in the beginning, something that had to be earned. Today, it has become a self-declared marketing term applied by developers.
Most developers seem to have the best intentions when they apply the study level moniker to their product. I worked with one developer as a consultant and their software engineers were busy studying manuals and watching YouTube videos. I had to warn them a number of times that the operator’s manuals are rarely complete and the version they had was most likely out of date. YouTube videos didn’t always show the correct indications. On one particular piece of hardware, I noted there were over two dozen different manufacture’s part numbers that could be installed in the aircraft they were trying to model and nearly a hundred software revisions that occurred over time. Even their real-world pilots were mostly only going to see normal operations of the hardware and rarely if ever see abnormal.