The core problem is one of content, unbounded complexity and game design.
Even the most flexible games rely on serious limitations to where you can go and what you can do with few exceptions.
It’s inherent to the robustness of the game and the production time involved in creating it.
If you have real physics you can break the gameplay, and it’s not that you couldn’t have different gameplay, you could but it would seriously affect the game design.
You also don’t have the data there nor do I think it’s feasible to have the data in the near term. If you cut a car in half you need to see the inside of the car, if you blow a building up it’s a lot more complex to make it real or even approximately real.
Half life could crunch the numbers for moving stuff around but the game design didn’t use it, even where it was used it was horribly contrived. There’s a lot you could have done in a real world scenario that couldn’t be done even when physics was used. Cut a rope and the barrel falls and squishes a guy, OK, but launch an RPG at a plank of wood and nothing. It’s ridiculous and it’s very intentionally ridiculous because of the limits of game logic and game design.
It’s not enough to naively say you can do arbitrary stuff or arbitrary complexity. Not every game can be FarCry w.r.t where you can wander (that had serious limitations too), it affects the gameplay in ways game designers don’t want it affected.
Moreover how often do you use physics in the sense a game engine does, apart from your own body motion, driving a car or throwing or catching something, really physics doesn’t get much of a lookin in driving everyday events more than stuff staying where it is most of the time and more than the stuff games do today anyway. It would be a very contrived and strange game where you had to use physics to solve problems. It’d be like lemmings but even more quirky.
So what does physics really get you? The power destroy everything you can see and have it break up in a realistic way and you can consequently go anywhere. Maybe someone will write a game like that now, it’s not entirely impractical to do a lot of that now but it would be pretty bad if every game let you do that with impunity, and you’d quickly run out of original data. Just imagine a game where you could go anywhere in a city block never mind a city, and destroy or cut open or break open everything and the complexity required, and think of the boredom. I don’t mean in a rigged contrived fashion, rigged is easy, that’s why all you get is rigged stuff. I mean go anywhere do anything see anything physics & data.