I'm guessing "describing the material and construction properties of every object such that it can be moved, collided, broken, and deformed convincingly." "Convincingly" typically isn't quite what you want either, you usually want "spectacular" which means hand tuning for all breaking/deforming events of interest. Movie effects, for example, start with pure simulation, but nearly always have lots of knobs for artists to play with to give the intended effect (e.g., the last page of this article http://www.wired.com/entertainment/hollywood/magazine/16-01/... ).

I'm sure APIs would be implemented which would provide games developers with programmatic 'knobs' for fine-tuning.

The problem is that the fine tuning only works for one particular situation. In a game, it has to work for every situation the user can create.

Then just don't bother with manual fine tuning. Level designers are using object libraries even now, where they just take a pre-made chair, instead of constructing them out of basic polygons every time.