Such things exist, but are very expensive.  The movie industry has 3D effects systems that simulates all kinds of physical forces.  Wind blowing on things, for example.  There are some intermediate products that do some of this - Poser, Carerra, and others.  They are in the $500 - 800 range.  I don't know of any open source application that does this.

- Mark

Some game engines have basic physics that could do things like this, but I haven't heard of anyone that has developed them to where you could easily do useful things with them. I was thinking about something like this as well. All the technology exists to do it, it's just that no one has combined it to be really useful yet, kind of like the reason for making the OSE machines.

I think Blender has a basic game engine and physics, maybe something could be easily done with that for rapid prototyping of basic mechanics. Also like Mark mentioned, 3d Studio Max is one high end product that has some physics stuff, I worked with it years ago and it was a bit clunky like most similar stuff. I haven't tried the latest versions though but they looked like they had roughly the same workflow. The early versions looked like they were starting to have some interesting stuff that could be useful for basic things, but I haven't checked how that has developed in the later versions.

It would be interesting to combine something like this with programmable arduino like stuff for prototyping robots/machines and then taking the code to the real stuff after testing. I've seen some programs kind of like that for robots but I don't know if they can meet the specifications, like being fast, flexible, easy to use, extensible, open source, physics, motors, etc.

Ideally it would be great to have an easy to use, fast, versatile tool that can be used to rapidly prototype machines, that can simulate/model/fake chemical reactions, basic materials, heating, reflections, fluids, gases, etc, and can integrate with a CAD/CAE/CAM workflow.

Easy and fast CAE (engineering) would be cool to see. I've spoken to programmers that have worked on LOD (level of detail) CAE, but the project didn't work out, although they said maybe they were too focused on the technical details and didn't have a big enough picture to consider how it would need to fit together and it ended up being too slow.

Lookup digital prototyping.  I have access to AutoCAD which is supposed to be able to do this stuff and I really look forward to getting a chance to learn to use it.  I think it could be very helpful indeed in our efforts as it should make collaboration over the internet much more effective as we people who are off-site FeF can make sure the designs are that much better and less bug free before they go to real world prototyping.