Went ahead and tested uploading and it works fine, few things you gotta do (upload as html file, set to play in browser, set window size to a multiple of 160x120 (e.g. 640x480), but not a big deal. Here’s the file I ended up uploading (and with even a few more query parameters 
):
my-cool-game.html
<!DOCTYPE html>
<html>
<head>
<meta charset="utf-8">
<meta name="viewport" content="width=device-width">
<title>my cool game</title>
</head>
<body style="overflow:hidden;">
<iframe style="position:absolute;top:0;left:-2rem;width:calc(100vw + 2rem);height:100vh;overflow:hidden" src="https://arcade.makecode.com/v1.11.37---run?id=S35510-75592-74609-07291&hideSimButtons=1&fullscreen=1&autofocus=1&nofooter=1" allowfullscreen="allowfullscreen" sandbox="allow-popups allow-forms allow-scripts allow-same-origin" frameborder="0"></iframe>
</body>
</html>
which shows up like this when uploaded https://jwunderl.itch.io/test-game-please-ignore
One more thing you might consider is using the github integration, which will 1. precompile the game for you so it loads faster 2. makes it a bit easier to customize as it can all be tracked easily / source will just be your github repo and 3. won’t load as a share link which can be easily taken out and distributed – still will be able to point to your site though https://arcade.makecode.com/github/getting-started
finally for anyone else, embedding as normal / with the simulator chrome works totally fine too, e.g you can get https://jwunderl.itch.io/another-test-game-please-also-ignore by playing with the options on the upload page (screenshot of options below) and uploading an html file that looks like this:
my-cool-game-portrait.html
<!DOCTYPE html>
<html>
<head>
<meta charset="utf-8">
<meta name="viewport" content="width=device-width">
<title>my cool game</title>
</head>
<body style="overflow:hidden;">
<iframe style="position:absolute;top:0;left:0;width:100vw;height:100vh;overflow:hidden" src="https://arcade.makecode.com/---run?id=S35510-75592-74609-07291&fullscreen=1&autofocus=1&nofooter=1" allowfullscreen="allowfullscreen" sandbox="allow-popups allow-forms allow-scripts allow-same-origin" frameborder="0"></iframe>
</body>
</html>
