In education, peer instruction (PI) is widely recognized as an effective active learning strategy. However, real-world evaluations of PI are often limited by logistical constraints and variability in classroom settings. This paper introduces PEERS (Peer Enhanced Educational Realistic Simulation), a simulation framework that integrates Agent-Based Modeling (ABM), Large Language Models (LLMs), and Bayesian Knowledge Tracing (BKT) to emulate student learning dynamics. As an initial step, this study focuses on evaluating whether LLM-powered agents can effectively assume the roles of teachers and students within the simulation. Human evaluations and topic-based metrics show that LLMs can generate role-consistent and contextually appropriate classroom dialogues. These results serve as a foundational milestone toward building realistic, AI-driven educational simulations. Future work will include simulating the complete PEERS framework and validating its accuracy through actual classroom-based PI sessions. This research aims to contribute a scalable, cost-effective methodology for studying instructional strategies in controlled yet realistic environments.