You can skip all of Betty's negative karma inducing tasks by finding the abandoned house at the beginning of the simulation. Step inside and activate the fail safe using the tones. You can also look at all the other notes written by Braun in here. After activating the fail safe, all the residents will be killed for good. You will receive positive karma, though, because you freed them from their otherwise eternal suffering at Braun's hands. Braun, as Betty, will be kept alive and forced to reside alone, forever. However, you can do all of the tasks for Betty and then activate the fail-safe. You will gain good karma and the citizens of Tranquility Lane will be revived and killed by the Chinese soldiers.

Old Lady Dithers will tell the player that she knows that Tranquility Lane is a simulation, that Betty is really "Braun", and that he uses a "Fail Safe Terminal". She mentions that the player should go to the Abandoned House, but mostly babbles.
Within the abandoned house, the player will find a set of usual objects which make unusual noises when activated. If the player enters the proper sequence, the Fail-Safe Terminal will reveal itself. In the terminal, selecting "Chinese Invasion" will summon a number of Chinese soldiers who proceed to murder the residents of Tranquility Lane, with the exception of James (stuck inside Doc the dog), Betty, and the player. According to the notes on the Invasion program, this program disables the fail-safes on most of the pods, meaning that dying in the simulation will kill the real-world person as well.
The tone sequence is Radio C, Pitcher C, Gnome D, Pitcher C, Cinder Block B, Gnome D, Bottle A.
If you can't remember the sequence to activate the terminal, note that each object has a specific tone, and Betty whistles the correct tonal sequence while playing in the center of the lane.
The solution melody is a cheeky reference to Tranquility Lane's soundtrack. The jolly theme is played multiple times by the marimba and once by the flute: F C D C B D A.
If you speak to Braun, he will lament that he is now alone and trapped forever within the simulation, something confirmed by his own notes on the Chinese Invasion Plan on the Fail-Safe Terminal: the systems in place for his own safety will not allow him to be killed, even if the Invasion program is launched. He will further point out that Doc the dog is actually James, and he will be waiting for you once you leave the simulation.
Using the Exit Door on the playground will end the simulation.