Imma be the guy and drop an ackshually
- Nothing about Lua would make it difficult to implement a physics engine in it compared to other languages
- The hardest part would be integrating with Morrowind's systems. If the engine doesn't expose e.g. collision geometry to scripts in an efficient way, then you'll run into some real challenges
- Even without LuaJIT, there's no reason to expect performance so bad you can't implement realtime rigid body physics. Interpreted Lua is fast, but even if it wasn't, a 60 fps performance target for physics is not tough to achieve at all