The game engine is definitely wrong here, and a lot of the answers are faulty.
Offensive holding penalties during a passing play(a) are enforced from the previous spot (b)(c) AKA previous line of scrimmage. Enforcement of the penalty effectively negates both turnovers. Accepting the penalty should have resulted in 3rd and 20 from the opponent 33. Declining the penalty would result in 1st and 10 from the opponent 20.
As for which is better, the answer is reliant on my evaluation of your opponent's offense vs. your defense, although given an average offense and average defense, my recommendation would be to accept the penalty.
NFL Rule Book References:
(a) 14-4-5: If there is a foul by either team from the time of the snap until a forward pass thrown from behind the line ends, the penalty is enforced from the previous spot. A pass play ends and a running play begins at the instant that a pass is caught.
(b) 14-3-4-a: The Previous Spot: The spot at which the ball was last put in play
(c) 14-3-6-c-1: Fouls committed by the offense behind the line of scrimmage, except for fouls committed in the end zone, are enforced from the previous spot.