Nvidia is going to try and bait AMD graphics card customers to Nvidia graphics, just for the PPU on-board, or integrated, or the exclusivity of using the Ageia software, which will likely now be tailored over time, to use Nvidia GPUs.
Intel will bait AMD CPU customers to Intel CPUs for much the same reason, the fact that their Havok physics engine will be tailored more and more for Intel CPUs.
Eventually, there will come a time when users will not budge, meaning that either Nvidia or Intel will need to budge, and start offering compatibility, otherwise AMD will need to offer their own-brand physics. At this point, the companies will likely start offering inter-compatibility, or better yet (to keep the profit margins up) their own seperate hardware.
Therefore, PPUs will come back around, most likely.
Offering PPUs, rather than offloading the work to other components already in use, means that those components won't be over-burdened by the work when it's extremely intensive. For example; imagine Half-Life 3 if you will. Imagine it has the latest physics engine, along with the latest graphics engine technologies, and is a very hard game to render, with a lot of work and strain for the CPU, GPU and PPU (if any).
Even with these dual-core GPUs/multi-GPU setups, the GPUs could be over-loaded with work, specifically at higher resolutions, with higher settings. How would they be able to efficiently work out the Physics, and destruction of objects, while simultaneously being able to put all of that on-screen? I'd say it would still be a hard task.
I still think, yes, GPU and PPU in one is a good idea, but frankly, I'd like a GPU that can handle the graphics, without being bogged down by working out all of the physics at the same time.
Oh, and just to re-iterate the first point, either way, AMD would be screwed, unless the Havok and/or Ageia PhysX engines were opened up to it, and I must say, that would likely mean that seperate PPUs might end up being released anyhow, so that AMD users don't suffer, but the other two companies can still earn profits.