Macroscopic decoherence (and therefore many worlds) is a straightforward prediction of the Schrödinger equation. It's not something you can just dismiss as imaginary.
Mathematical solutions are never guaranteed to be physical, or even potentially realisable.
I consider this scenario improbable.
No. The "pilot wave", in pilot wave theory, is a mathematical object identical to the universal wavefunction of the many-worlds interpretation. As such, if you believe that computation is all is required for consciousness to exist (and there's no separate "is real" tag on the math), then it's an incoherent concept.
I fall on that side myself, but I can't convincingly argue that it's the right philosophical stance to take. I've yet to see anyone give a proof, it just seems most likely.
I tend to think of it like the number line. There are infinite numbers between 0 and 1. If we decide to define infinite unique ranges between 0 and 1, the space each one occupies becomes infinitely small and the total range is conserved.
But we don't know whether the multiverse is infinite or not, so that corresponds to the question of whether the range is from 0 to 1, or 0 to infinity.
Either way, the original point stands, and unitarity of the wavefunction (the most notable conservation law) is maintained in Many-worlds.
Where people get confused seems to be a mix-and-match of incompatible parts of the Copenhagen and Many-worlds interpretations, where you have both universe-splitting and the non-unitary wave function collapse in the same flawed interpretation.
I was not aware of that development. in what way is the Copenhagen interpretation inconsistent with the Schrödinger equation?
Given direct experience of one universe, I think it's more ontologically conservative to introduce multiple universes than it is to introduce a whole new unprecedented category of cats that are simultaneously dead and alive.
Very loose analogy: if I see a mouse in front of me and simultaneously hear a squeak behind me, I'd probably assume two mice rather than one mouse which has learned ventriloquism.
Which makes it mildly ironic that John Wheeler, a leading early proponent of many-worlds, also proposed the one-electron universe...
I'm not sure if this theory is used by many-worlders, but eigenstates of the Hamiltonian don't interact with each other at all. It could be that a similar selection rule explains why many-worlds eigenstates don't seem to interact.
> What causes this creation of matter and energy?
You don't need to create energy to put a quantum system in a superposition of more states. You divide the energy of each state by its amplitude squared to get the total energy, and the amplitudes squared sum to one. So in Many Worlds, as with regular QM, the amplitudes of each state get smaller as you add more states. Total energy doesn't need to change.
What is the physical explanation as to why they don't interact? I.e. does gravity not travel along that space-time dimension? Is there a second time dimension? Are the universes created infinitely far apart?
That is the physical side. Your physical intuition may be getting in the way.
> What is the embodiment of the energy that is being infinitely divided?
What is the embodiment of the energy eigenstates of a quantum harmonic oscillator in a superposition? I'm not sure what kind of answer you want, but it's the same as the answer to that.
> What is the physical explanation as to why they don't interact?
Because they're (in my hypothetical scenario) eigenstates of the Hamiltonian. To get an intuition as to why they don't interact (again, in my scenario that might not correspond to leading many-worlds theories), look at the simplest possible case; one dimensional quantum harmonic oscillators. There's no short answer to your question.
> I.e. does gravity not travel along that space-time dimension? Is there a second time dimension? Are the universes created infinitely far apart?
Unfortunately, none of these questions are in the right ballpark. They are too complicated. If a selection rule in the universal Hamiltonian (or something) is the answer, they just won't interact at all. Bringing notions of other dimensions, or great distances, or whatever into it is unnecessary.
Unfortunately, I don't think any suggestion I can give here will alleviate your confusion without having a background in QM. You may want to read Griffiths QM textbook if you're really interested.