Im not so sure of that. Just take a look at Farcry 2 and Crysis, both seem to be pushing physics quite hard and certainly well beyond the limits of previous generations. And all without Cell or an Ageia PPU!
I remember one of the selling points of the PPU originally was "imagine fields of grass that sways in the wind and gets pressed down as you move over it". Yup Farcry 2 has that.
Yeah great physics yet without the use of Ageia PPU in those 2 games. Although I wonder how it is going with the GPU physics based tech from Nvidia and ATi.
This doesn't make his point any less valid..
In both games you mentioned the vast majority of people care more about the graphics than the physics and both don't utilise physics to any particularly novel and important degree.. Wind and swaying grass is a nice asthetic touch but adds nothing to gameplay..
It is not just that but effects affected by physics (smoke, fire etc), objects around react ot the wind (trees, bushes etc) and pressure waves from explosions etc... I am shure they affect the gameplay in some ways.