Saying everything is conscious is also dualism. it's saying that every kind of computation (or perhaps every physical substrate) has another dimension of properties that aren't physical/structural and don't interact with the physical/structural world. So it's not an explanatory boon but rather an extravagance.

The 'where is the consciousness' question is interesting but not really a hard problem. The issue can be solved by being clear about what purpose does consciousness serve then locate where that need is realized. Consciousness is about information integration and broad access as a substrate of decision making. Recursive integration identifies the where. But thinking in terms of nested VMs is sort of missing the point. The point is to trace the flow of information and find the points of broad integration. This may involve multiple substrates. Identifying a single thing as being conscious is a mistake. The consciousness is the most narrowly specified causal dynamic that grounds the information integration.