That’s just the same as blowing a hole in a wall with tons of physics debris – the important fact is that the hole now exists (and presumably you can get through it), and the debris makes it feel real and that we’ve had a big impact on the world.
Just a coincidence I read a feature on the new indiana jones game for the ps3, and it seems to have a good mix of both points in it. The physics of the NPC’s interact with a continually changing environment in what seems like a very realistic way. Whether or not they can pull it off is a different story.
Heres the links if you’re interested. prettty cool.