Firstly, it certainly isn't impossible, but I have my doubts:
1.) Would PhysX really help with this. Most of the demos have cloth tearing or stuff falling. Do they have fluid flows/can it be done at a decent FPS.
2.) PhysX modeling is expensive and requires lots of effort. If it can be done like it was in the past, they will probably choose that.
3.) The real kicker, Thanks to NVidia's stubbornness, PhysX is a NVidia only Physics API. Thus, if they made it required or a major part of their game, half the customer's wouldn't get the benefits, which would not be a good thing.
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