Impressive stuff!

As for whether it could ever be done real-time...  Why wouldn't it ever be possible?  There's stuff happening in real-time now that couldn't be easily achieved with pre-rendering not so long ago; and some manufacturers are releasing dedicated physics cards to process these kinds of effects.  It's just a matter of time.

In fact the couple of news items I could find on this physics engine seem to imply it will filter down to games soon enough...

pretty sure stuff like that will be possible in realtime.
as you can see most parts of the video are actually realtime. but just in a preview mode.
but as computers get faster, renderers will. so i dont have any doubt.

> some manufacturers are releasing dedicated physics cards

all the recent nvidia graphics cards support physx, which is GPU accelerated physics