There are no such thing fake vs real physics engines, there are just deeper granularities of physics, for red faction its just the havok engine with more bells and whistles, more realistic maybe, real no.
Even then it is just a macro physical representation. If you have two developers that create a physical interaction, one designs a complex & process heavy algorithm as close to reality as possible and the other uses a low process trick to make it appear that way, i.e. the outcome is indistinguishable to the user, then it is the developer who has created the illusion that has done the better job, freeing up the system capacity for other tasks.
There are super computers running physics simulations hundreds of thousands of times more powerful than any console and they are still considered basic simulations compared to real physics.
I agree that in the long run if developers have the spare capacity to create a more true to life physics engine then they should do so, but not at the expense of other areas of the simulation, graphics for example. If they can trick us into making it look the same as it would with a more complex system then they should carry on for now instead of wasting valuable power that could be used elsewhere
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