Graphics processors are designed for graphics. Physics is an entirely different environment. Why would you sacrifice graphics performance for questionable physics? You’ll be hard pressed to find game developers who don’t want to use all the graphics power they can get, thus leaving very little for anything else in that chip.
Ultimately, ATI's solution was referred to as “questionable”, which is almost comedic. ATI definitely upset Ageia, and now they will be both entering the ring of 3D desktop games and duking it out to see who really offers the best performance.