Not exactly. Physics doesn't deal with AI. ;)

Ai determines the character actions and travel patterns. Everything else dictates the interactions.

Ai hasnt really changed that much since N64 era either. Play FEAR and you'll see.

If you know that then why did you bring it up twice as a rebuttal?

The character movements are done by animations, not physics! What I think your talking about is rigid body physics for NPC's where the force applied to the to the NPC's body parts will make it move. 

I meant their movement patterns. You know, how they traverse the ingame world, the routes they take, the environments they interact with

Like I said, show me that stereoscopic 3D is not approximately twice as demanding. For example show me a game where turning on 3D will not chop off the framerate by approximately a factor of 2. Just do that and I can end the arguement. 

Then what you are talking about is their animations. :)

No Im not talking about how they move, but the rational behind the way they move through their virtual "lives"

AI and animations then. ;) (I hope I've cleared this up.)

:eyerolls

Those rarely even get better with tech. So its moot :X