The DEFINE is correct but it doesn't mean that the PIC will RUN at 20MHz. What it does is tell the compiler at what speed you INTEND to run the PIC so that it (the compiler) can calculate the proper delays for things like PAUSE, SEROUT, DEBUG etc.

It's up to you to make sure that the PIC actually gets a 20MHz clock to run from. In other words fit a 20MHz crystal etc. Now, since you're using a simulator there's probably a way to specify the clock frequency.