i made an attempt at an atmospheric flight and orbital mechanics model with scripting. dispite good flight mechanics, the ability to orbit small moons and fly in mars atmosphere, it causes crashes, ai doesnt work, and collision detection is virtually non-existant. we would need to be able to need to hook in before collision detection to move objects and calculate velocities, overriding what the game would normally do at this point, then let the game run collision detection based on the physics data. then hook into collision response (this i think is possible) to apply changes in positions and velocities caused by those collisions.
the game makes a lot of assumptions about how things work as far as physics go, assuming things like velocity caps and whatnot. hooks and overrides may not be sufficient. add to that the state of the collision detection code, and you have a nightmare scenario for making a script based physics replacement system possible. i dont want to completely write off the possibility, but it would require a lot of work and you would be hard pressed not to break the existing physics of the game.