This topic is linked to from the Google News Physics sections. Interesting.
I'm not sure why this question is necessary. Network physics has been in use for a very long time. I have deep involvement in Myst Online: Uru Live, the MMO from Cyan Worlds. Uru Live ran under Cyan Worlds' Plasma game engine and used the Havok physics engine when Uru Live was first in beta in 2003. It was ported to PhysX for the GameTap release in 2006. We are still using PhysX in MOULa, the open source incarnation of Myst Online: Uru Live, currently available. We have PhysX working quite well, but may in the distant future port to Bullet.
MagiQuest Online, the MMO from Creative Kingdoms, for whom I work and helped develop the game, also uses Cyan Worlds' Plasma engine, as it was known before the release of Myst Online: Uru Live to open source as the Cyan Worlds Engine (CWE).