Framing stories such as this one normally present the inner story as narrated by a very different kind of narrator from the main overall narrator of the piece. Clearly, in this tale, the educated and sophisticated Mark Twain is presented as being incredibly different from the verbose and hilarious Simon Wheeler. Reporting the story in this fashion and sharing the reactions of the main narrator to the story in this case helps to exaggerate the humour and also gives the tale a note of authenticity. Note how the introduction to the tale of Simon Wheeler also serves to prepare us for the tall tale that he shares:
Simon Wheeler backed me into a corner an blockaded me there with his chair and then sat me down and reeled off the monotonous narrative which follows this paragraph.
Reference to a "monotonous narrative" clearly stands in sharp contrast to the humour of the tale that emerges. Also, the idea of Simon Wheeler "blockading" the narrator into a corner so that he has no escape clearly suggests the humorous nature of the tale that is about to be shared. In a sense, this story is as much about the character of Simon Wheeler himself as it is about Jim Smiley, and using the framing story allows Twain to fully develop both characters.