The downside is that such true physics can’t really be used in multiplayer games. The physics here are part of the gameplay. There is so much data being modified due to the new processing power, that it’s impossible to synchronize all clients, even over a LAN. We’re talking about lots of MBs per world-step. Think of a tower composed of bricks tumbling down. Due to the delay (you can only send the updates to the clients after it stepped) and the lag (network) tiny difference in the location could have an enormous impact on what happens with an object later - whether a pile of crates has tiny gaps to shoot through, might vary per client. This, and the sheer bandwidth/datatraffic required, makes it literaly impossible to sync. Further the server has to validate all changes (“is the client allowed to apply that force?”) to prevent cheating, so you could save up some spare cash to get your hands on a 8-way-opteron.
In singleplayer games it will be extremely useful enhancing gameplay and immersion.
For multiplayer it will probably be used to have extreme ‘local’ detail, only sync-ing the ‘relevant’ items, but in the end each client will see a more or less different world, where even the slightest change might affect gameplay immensly.