'The informant is real?'

(note. This post is attempting to be written without recognizing that there are two more Matrix films following the first.)

The Matrix provides a fantastic medium in which to analyze the ideas Baudrilard presents regarding the simulation of Reality. Let's start by assuming that we have both working knowledge of both the Matrix and Simulacra and Simulation. The crew provides a vast array of how we can view life once we accept that we are living within a world that has become a simulation of a simulation. First we have Cypher, the informant who gives up Neo. He despise the world in which Zion exists (which I will refer to as Zion from here out) and wishes only to return to his state of 'ignorance is bliss'. He believes that even though he was living a lie, buying into that lie is a better life then constantly running from Sentinels and Agents. His is the pessimistic view who acknowledge that we live in a false reality but long to return to their state of unknowing. The cyber-pimp Mouse follows nothing but his desires which are nothing but a creation of the simulation (in literal form, the girl in the red dress). His is the id of the crew, the 'I don't care that it isn't real, it still feels good.' He tricks his mind, even for a short time, into believing that the simulation is reality. He states that 'to deny our impulses are to deny what makes us a human being'. But aren't these impulses generated within the simulation, which would make them anything but human. If this is the case then to their impulses are what make them even more fully integrated into the simulation and into the false world of the Matrix.
The three main characters, Neo, Morpheus and Trinity difference revolve around their interpretations of the Prophecy, as given by the Oracle. Morpheus fully buys into this prophecy, basing his life around the fact that he will find 'The One'. Trinity is skeptical as she is told she will fall in love with 'The One'. And Neo is told he is not 'The One'. But wait a second. What exactly is this 'prophecy'. It is merely a statement from within the simulation stating that someone can free them from it. The statement comes from within the Matrix, not from Zion, which means that it has necessarily voided its ability to produce a truth (much like language necessarily cannot describe what it is attempting to.) While on their way to the Oracle Trinity states that 'The Matrix cannot tell you who you are'. To which Neo replies 'But an Oracle can?'. he recognizes that their idea of escaping the simulation/symbolic world is impossible if they rest their hopes on something developed within that system. This is why the Oracle tells Neo that he isn't The One. Had she told him the truth it would have conflicted with Neo's idea that the Matrix/Oracle can tell him who he is.
Well who are any of them when they are within the Matrix? They are nothing but a simulation of their Zion self reproduced within the Matrix, a world in which they should have the ability to control. Not one of them has allowed their brain to give up to the fact that the Matrix is in fact a simulation. The crew even attempts to differentiate the 'real' from simulation by all wearing sunglasses while in the Matrix. By wearing shades they make an effort to separate themselves from the simulation around them. Neo however tends not to wear sunglasses, immersing himself in the Matrix (figuratively, and at the end literally with Mr. Smith). By immersing himself within the simulation he acknowledges that he is himself but a simulation, and as such is able to do anything he would like to. The rest of the crew attempt to hold onto the notion that there is a shred of real within the simulation.
Morpheus himself, the champion of Zion, is held back from full enlightenment by grasping on to notions of the 'real'. In his fight scene with Neo he states that physical properties don't matter, that speed and power are really nothing and yet he states two minutes later that Neo is 'faster then that'. By holding on to these notions he limits his abilities to fully free himself from his tie with the Matrix as Neo eventually does.

This notion that Neo must fully free himself from the 'simulation' in order to become 'The One' is proved in a two step process at the end of the film. First Mr. Smith calls him Mr. Anderson, to which Neo replies "My name is Neo". This simple statement signifies the rejection of the simulated self that denies the simulation (Mr. Anderson) and the assumption of the fully simulated self. 'Neo' is nothing but his call name online, a fully simulated world. Stating that 'He is Neo' is him stating that 'He is fully simulated.' This further rubbed in our face when Mr. Smith says 'Goodbye Mr. Anderson' and kills Mr. Anderson. 'Neo' Fully rises from the dead, because of his recognition that his simulated self as no relation to his actual Zion self. He then rises from the 'dead' and dives into Mr. Smith. This dive into Mr. Smith shows the limitations the Agents themselves have within the Matrix. They are tied into the notion that they are an entity, even though they acknowledge they're living in a simulation they are tied to their image(which is why any person can turn into an Agent but must change their look to look like an Agent.). Neo's shattering of Mr. Smith's image shows the limitations those who attempt to maintain the simulation have.