Anytime you use a word, all of its possible connotations can be present in a listener's mind. Those that do not (cannot reasonably or even perhaps emotionally) fit the context in which you use it are normally filtered out (but they are still present on some level).
The primary meaning here is gross in the sense of great (large) or coarse-grained, and not disgusting. (But see my last point here, about oversimplification.)
But the context does not rule out an additional (parallel, possible) understanding of disgusting. That is, it is possible to meaningfully read the sentence with the meaning of disgusting in mind -- that is a possible interpretation.
More context (e.g., additional sentences) surrounding the occurrence can further filter, strengthening the meaning in one direction or another. For example, surrounding context could make clear that the speaker did, in fact, want to suggest that the oversimplification was disgusting.
Already (without any additional context), the use of the term oversimplification suggests something untoward, possibly disgusting or uncalled for, and not just a large simplification.