This video shows many different levels of detail on the brick demonstration at the NVIDIA booth. You can hear discussion between myself and the Havok representative that says the API and hardware can support interacting with the environment, but they are choosing not to do it now as it affects a users game play so dramatically. He clearly states that Shader Model 3.0 is the only necessity for the Havok FX functions to work so the ATI R520 and R580 chips will definitely work.
For more information on these videos by PC Perspective from GDC 2006, visit their show article.
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