Here is an awesome video using physics inside of Blender a free open source 3d software. It is amazing what open source free software is able to do now. Noodle physics simulation ;p – Blender and Bullet Physics – YouTube.
Here is more on the creation of this animation: http://www.blendernation.com/2012/04/05/noodle-physics-simulation-blender-and-bullet-physics/#more-27301