physics aren't remotely complex enough, like graphics, as to necessitate the need for external processing and B) physics complexity in games will never, ever outpace the CPU's ability to handle it.
Bullshit. Physics are probably more complex than graphics. Rendering transformed polygons, rasterizing to 2d scenes, blending layers and layers of polygons of varying materials is naturally suited to a dedicated GPUs.
Physics are the same way. Games have had to avoid many aspects of physics due to their complexity and inability to process in a real time game. True geometric shattering, fluid dynamics, accurate deformation of models, and countless other aspects of physics remain untouched due to the complexity of modelling them in real time. CPU's are not up to the task of all that. The only thing that keeps current CPUs ability to handle it is by developers careful use of only specific aspects of physics. We've only scratched the surface of physics in games. More realistic collision responses by material types, vehicles, various joint types are but a small portion of what can be done with physics. Even within those domains the implementations in games is simplified quite a bit.
Phyics on the GPU will probably remain as an eye candy focus for a while at least, but it's not impossible to have game effecting physics on a seperate processor(GPU or PPU). Reading back object transforms, or getting collision results back is well within the capability of GPU read operations, as it doesn't approach the complexity(in terms of bandwidth) of reading back textures or procedural meshes, etc. Until there is enough market penetration from this sort of thing developers probably won't use it for gameplay effecting features though. In the end whatever reduces CPU load ultimately gives the rest of the game more headroom. Physics and collision happens to be one of the more expensive aspects of games apart from rendering. The quicker we parallelize that, whether on the GPU or multicore CPUs, the more is opened up for the rest of the game, like AI.
Also regarding AI, as I am a professional AI developer(Pandemic Studios on Mercs2), as well as hobby developer(Omni-bot), I can mention that collision and physics are a large cost of AI, for vision, pathfinding, cover determination, etc... and the cheaper that ultimately gets the better it is for that aspect of AI. If NVidia helps us work towards putting game effecting physics onto the GPU it's a win for developers in general, just as offloading graphics was way back with the introduction of video cards.