The gas-cooled micro modular reactor (MMR) is a novel concept with a compact fuel form consisting of thousands of tri-isotropic fuel (TRISO) particles dispersed in a silicon carbide matrix. The MMR fuel has a high volume packing fraction and is horizontally placed within graphite channels. This study demonstrates that the horizontal arrangement of MMR fuel within graphite channels resulted in a non-uniform gap between the fuel and graphite brick, leading to an "off-center" temperature distribution within the fuel, and resulting in differences in TRISO performance even within sub-zones positioned symmetrically in the radial direction. Given the complexity of the fuel structure and the challenges involved in simulation, a multi-scale and multi-physics coupled analysis method of MMR fuel was realized in this work by implementing physical models into the open-source finite element platform MOOSE. Thermal-mechanical analysis and failure analysis within sub-zones of the typical design MMR fuel during normal operation were conducted through simulation. The results indicate that higher-temperature sub-zones exhibit increased internal pressure within TRISO and show greater tensile stress in the Chemical Vapor Deposited Silicon Carbide (CVD-SiC) layer. Regarding fuel failure analysis, this work found limited impact from Pd penetration and kernel migration. Pressure-induced particle failure, closely associated with stress in CVD-SiC, emerges as the primary failure criterion. The probability of fuel failure is relatively low, and interfacial cohesive parameters have an impact on the SiC stress and the fuel failure probability at the highest level.