The slowdown is most likely CPU related. Many rigid body physics engines generate a joint/joints to resolve interpenetration of objects, and if there are many objects colliding with each other, that means many joints. In that way, all the objects are interconnected, and thus the performance does not scale linearly with the number of objects involved in a collision, but worse (how much worse depends on the algorithm used for solving the system).
Edit:
Also, though I don't want to get into comparisons too much, since you asked: The same kind of action obviously would not cause slowdown on the other consoles. Wii has a 730 MHz G4-derived (?) single-core CPU. XB360 has a triple core 3.2 GHz CPU with real SIMD, and PS3 has 7 computational cores at 3.2 Ghz, each of which by itself is more powerful at the kind of single precision floating point number crunching that is required for the simulation than the Wii CPU.
Edit:
Also, though I don't want to get into comparisons too much, since you asked: The same kind of action obviously would not cause slowdown on the other consoles. Wii has a 730 MHz G4-derived (?) single-core CPU. XB360 has a triple core 3.2 GHz CPU with real SIMD, and PS3 has 7 computational cores at 3.2 Ghz, each of which by itself is more powerful at the kind of single precision floating point number crunching that is required for the simulation than the Wii CPU.
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