I'll have to look into that naz, I love finding a new band to love on.

Folding@home is a multi-hardware project, just how is that any reasonable comparison to one single pc cpu? And if it is as you say then we should have games like never seen before on the PS3, which is complete BS at the moment. Carry on.

Sorry, but you're mistaken.  This engine can't be run on the PS3 or 360.  It's been stated many times by developers that this is far above what they can handle.  Now you could make the same basic game on the PS3 and 360, but you would have to dumb down everything to the lowest settings including the physics. 

Consider this:  I have a PC that can run any game that's been made with a console and PC version so far at at least double the frame rate of the console version WITH better graphics.  I can only run Crysis on medium.  So, medium for Crysis is far more demanding than anything that's been on a console.  There are 2 full graphics settings above that.  High, and Very High.  Trying to play Very High on a PS3 would be like trying to play Metal Gear Solid 4 on the Wii.  

"And if it is as you say then we should have games like never seen before on the PS3, which is complete BS at the moment. "

We are still talking about physics right? And in this particular area the Cell really is much more powerful than any PC on the market if used correctly. Have you seen Little Big Planet? Some scenes have amazing physics interaction between complex objects.
And for something similar (if not as pretty) to the first scene:
http://youtube.com/watch?v=-hlzkWHsNTc&feature=related

Or this cool scene of leaves in a tornado
http://youtube.com/watch?v=MRB-zQogLeY&feature=related

Or the ducky demo (just ignore the annoying presentator)
http://youtube.com/watch?v=K1RVAhpZWxU&feature=related

Overall the PC has more general-purpose power nobody is arguing against that. But it is silly to say that consoles couldn't compare to the physics of PC games, when the PS3 essentially has a Vector-computer build in that is normally used for physics simulations.

PCs have better graphics because their graphic cards are 2 generations ahead. They have much more RAM, they have faster computing but physics is one area where the PS3 eats their cake, developers just have to use it, we just have had the first year after all.

"This engine can't be run on the PS3 or 360. "

The engine could be run on consoles but they would have to reduce the details that is correct.

Again I am not saying that PCs are not more powerful. Bigger RAM and much more powerful graphic cards mean better looking games.

But again physic simulations (and other number-crunching apps like video decoding/encoding, audio processing, upscaling etc. pp.) are an exception. Here the PS3 is simply more powerful because these are the tasks that are much more efficient on Vector-processors (which is essentially what the Cell is).

Compared to PCs, the XBox 360 and PS3 were never even close to the performance of the top of the line PC; as time goes on and Moore's Law continues to push bleeding edge PC hardware to new heights, the PS3 and XBox 360 look more and more obsolete in comparison.

This isn't to say that the PS3 or XBox 360 are weak, in reality they are very powerful systems for their price. The problem is that at the bleeding edge (where Crysis lives) PCs are (at least) 4 times as powerful as the PS3 or XBox 360 and it is silly to expect that they can produce the same kind of results in physics or graphics without sacrificing something.

Well in pure physics I'd say it's theoretically possible, but there are a lot of other processes in Crysis handled by the GPU and CPU that the consoles can't handle. Also, I say theoretically, because we haven't seen anything close. LBP has great physics, but they are only in a VERY small area, whereas in Crysis there is actual WIND. Yes, wind that effects the entire island, spreads fire, determines the direction trees fall, moves the grass etc.

One thing that they can't handle is the AI. The AI on the entire island is constantly interacting. Console games tend to have an AI "bubble" where the AI begins interacting when you get within a certain range of them, but in Crysis the AI doesn't stop. If you attack a camp you can be 2 miles away and that camp will still be hunting you and rebuilding.

Also as you said as well the GPU's are clearly far more limited than current PC GPUs. Btw, I'd just like to point out that Crysis itself isn't that good a game.  In fact, it's pretty average for an FPS.  It's just made some amazing technology breakthroughs.  

"but there are a lot of other processes in Crysis handled by the GPU and CPU that the consoles can't handle."

true. I never wanted to say anything else. I am a PC gamer by heart I only switched to the PS3 because it is much more comfortable to play from the couch on a big LCD screen and this generation PS3 and 360 finally have comparable firepower and games as PCs (not as HighEnd PCs but only few games like Crysis require those)
(I will return to my PC for Starcraft2 though, hopefully Blizzard continues its tradition of modest hardware requirements.)

Even in physics there is a gap. Those demos you are linking to are optimized in a way that you really can't accomplish in a running video game.

I have no doubt that the physics the PS3 can produce are a lot closer to PCs than other areas but it isn't up to par with the latest and greatest.

With that said it doesn't have to be. Consoles appeal to people who don't want to spend $800 on a high end gaming rig and would prefer to spend $400 on a console with comparable results.

 There are some tricks you can do to accomplish the bubbleless AI without doing full simulation of all entities on the island every second. These are things that I can come up with off the top of my head.

Using an appropriate scheduling system with priority inversely proportional to each entity's distance from the player you can set it up where more distant entities only have their states updated less frequently. All of the nearby entities can be simulated at full speed while more distant entities may only get ticks once every 30s or longer and do 30s of moving or reconstruction during their tick.

Another option is to use the bubble approach but save information about the most important aspects of the distant entities and then generate the new state when the distant entities come into the bubble. For the camps example, the important states would be things like the damage to the buildings and when the damage was done, how many enemies are left at the camp, the radius around the camp in which the enemies are searching for you (this should spread out after an alert and then begin to decay if they fail to find you for a period of time). When you come back to the camp, the enemies can be assigned to random positions within the radius and the buildings can be repaired based on the time since they were destroyed and the number of repairers working on them.