where to insert a thermocouple simulator in a circuit?
Since you don't know the source of the error, either location would probably offer useful data. At the USB connector will allow you to determine if the USB port and PC are causing the error. But you will probably get additional useful information by moving the simulator to the other end of the thermocouple extension wire to see if the wire run is introducing errors. 

You didn't identify your physical process, but many cases of low temperature readings are caused by mounting arrangements that cause unwanted heat-sinking into the flange or pipe so the thermocouple never reaches the process temp. In plain language, some large mass of metal sucks the heat away from the thermocouple faster than the process can heat it.