Dear Anonymous,
I do recognize that the phrase "the universe is a computer" will be interpreted differently by different people, and I agree that this makes the title somewhat imprecise (when taken on its own). But hopefully it is not *too* misleading; some physicists, at least, interpret this phrase as I'm defining it in the essay abstract and body (using the more-precise concept of the "NSU").
So, to answer your question, the incorrect Basic Physical Assumption is that the fundamental "rules" that govern our universe are "computer-like", in that they causally evolve an initial "input state" to generate future states. Because of this assumption, we physicists tend to only look at mathematical models that work in the same manner -- aka the Newtonian Schema.
Hand-in-hand with this assumption is another, more subtle one: The notion that the non-NSU, Lagrangian-style approach is not a valid Schema in its own right, at least when it comes to looking for a fundamental explanation of the evident correlations across space and time. Without giving up this second assumption, it's hard to give up the first.
All the Best,
Ken