Again, I am not misunderstanding the scenario... Maybe I should boil it down to basics: If you want PhysX, you need a "pure" nVidia graphics system. If you want to throw a wildcard ATi into the mix, nVidia wants no part in any possible support nightmare scenarios, so PhysX is disabled. Period.
I've done my share of programming (including drivers) so I can attest firsthand to the fact that it is often a microscopically fine line you are running, and hoping that nobody throws a curveball at you by changing THEIR drivers in such a way that it affects you too. nVidia (and ATi for that matter) has enough work to do just always keeping up with the general trends and constant advancements, to stay in step with current performance in terms of drivers and technical issues. What most people saying "nVidia sucks" on this thread seem to not get is that nVidia is not responsible for issues that might stem from mixing and matching wildly different GPU hardware. But you all seem to think they should be. If you put an ATi card into the mix, you have now created a hybrid situation, it is no longer an nVidia graphics system, so you have voided your option to run PhysX. It's amazing to me how people just expect companies to support stupid crap that they don't NEED to support, just because those people feel they are entitled to it. Who pays for all the extra time, research, programming, and support for that endeavor? You expect nVidia to just give away any profits they might make so small percentage of their customer base can be mollified in case they MIGHT want to do something a certain way that is, by its very definition, a nonstandard configuration?
The sound card comparison is ridiculous, that is apples and oranges. This is a situation where you have 2 pieces of hardware that do the same job, but use 2 totally different driver sets, and have any number of possibilities for conflict between the 2 platforms.
You say they possibly have a bug in their system, but in reality it's not a bug, they just didn't waste the time to develop, adjust, and maintain their applications to benefit THEIR COMPETITORS. Yes, hardware gets dated and needs updating, but you always have a choice, and in this case your choice is to stay with nVidia if you want PhysX, or go with ATi and lose that option. It's not rocket science, but it IS business, and nVidia is playing it smart. As I have said before, I may not agree with nVidia's practices (in fact I almost never do), but this one I can't fault.
Oh, and "you don't fix that by disabling everything!" Really? Come on, they are disabling PhysX, a (currently) seldom-used piece of GPU-intensive code that has been cobbled into their driver system to run on their hardware, rather than forcing you to buy an expensive physics processing card (hey, but let's not give them any kudos for THAT part). That's it. But, by all means, over-dramatize it by saying it is "everything" and join the doomsayers... heh