Creating a logic gate simulator

I need to make an application for creating logic circuits and seeing the results. This is primarily for use in A-Level (UK, 16-18 year olds generally) computing courses.

Ive never made any applications like this, so am not sure on the best design for storing the circuit and evaluating the results (at a resomable speed, say 100Hz on a 1.6Ghz single core computer).

Rather than have the circuit built from the basic gates (and, or, nand, etc) I want to allow these gates to be used to make "chips" which can then be used within other circuits (eg you might want to make a 8bit register chip, or a 16bit adder).

The problem is that the number of gates increases massively with such circuits, such that if the simulation worked on each individual gate it would have 1000's of gates to simulate, so I need to simplify these components that can be placed in a circuit so they can be simulated quickly.

I thought about generating a truth table for each component, then simulation could use a lookup table to find the outputs for a given input. The problem occurred to me though that the size of such tables increase massively with inputs. If a chip had 32 inputs, then the truth table needs 2^32 rows. This uses a massive amount of memory in many cases more than there is to use so isn't practical for non-trivial components, it also wont work with chips that can store their state (eg registers) since they cant be represented as a simply table of inputs and outputs.

I know I could just hardcode things like register chips, however since this is for educational purposes I want it so that people can make their own components as well as view and edit the implementations for standard ones. I considered allowing such components to be created and edited using code (eg dlls or a scripting language), so that an adder for example could be represented as "output = inputA + inputB" however that assumes that the students have done enough programming in the given language to be able to understand and write such plugins to mimic the results of their circuit which is likly to not be the case…

Is there some other way to take a boolean logic circuit and simplify it automatically so that the simulation can determine the outputs of a component quickly?

As for storing the components I was thinking of storing some kind of tree structure, such that each component is evaluated once all components that link to its inputs are evaluated.

eg consider: A.B + C
The simulator would first evaluate the AND gate, and then evaluate the OR gate using the output of the AND gate and C.

However it just occurred to me that in cases where the outputs link back round to the inputs, will cause a deadlock because there inputs will never all be evaluated…How can I overcome this, since the program can only evaluate one gate at a time?