This is the thing
the average joe hasn't seen what its capable of, so writes it off, developers know what its capable of and would like to get it into games... but everyone wants the proof before the pudding... so its a vicious circle.
The current generation hardware physx is quite capable and fully functional, other than its still a little bit low on the active bodies count for my tastes.
Unfortunatly no developer is going to spend time implementing features that aren't incidental ones and can be turned off without gameplay consequences, and the features that would make an impression on people would need to be much more integrated with the game so with the current state and attitudes of the market... everyone loses out.