Coupled with AF447, I would love to know why incompetence of this level isn't being spotted earlier (e.g. in the sim)
First of all, the vast majority of simulator type rating training and recurrent training is with full use of automatics. Thus, incompetence at manual flying would rarely show up unless an inadvertent unusual attitude just happened to occur. Apart from specific non-normals (manual reversion for example) hand flying is usually confined to the last part of an ILS and even that would be with FD and AT engaged.
Secondly, most unusual attitude training ( if practiced at all) is kept within the Boeing definition of unusual attitudes which are clearly stated in the FCTM. In fact, these are quite benign attitudes and easily recoverable. Rightly or wrongly, recovery in IMC from inverted nose down flight is rarely practiced in the simulator and it is left to the pilot to learn by reading from the FCTM and QRH sections rather than practicing in the simulator.
To have found himself in the extreme attitude described in the incident report, the copilot must have been way behind the aircraft to have allowed it to develop into such a serious Upset. In fact, it is most probable the copilot himself applied erroneous manual inputs to the flight controls that exacerbated the initial problem caused by inadvertent trim input.
With most simulator training confined to box ticking exercises designed to minimize training costs, it is no wonder that pilots are rarely given the opportunity to assiduously practice manual flight manoeuvres that require good skills such as Jet Upset and stall recoveries at high altitude as well as crosswind landings on slippery runways.
To make things more difficult for new pilots, it is rare to have a simulator instructor set a good example by personally demonstrating how to fly these maneouvres, before handing over control to the student to have a go. The assumption seems to be that if the student has a commercial pilot's licence there should be no need for an instructor to demonstrate. Not all students are aces and an instructor demonstration may be needed rather than a box quickly ticked.