Physx with ATI providing primary video output

If you are running Xp, it will work just fine.

If, however, you are running Vista or Windows 7 (assumption as the Win7 kernel is basically the Vista one), it will not work.
Vista only allows you to install one driver package for your video card(s).
That means, unless nVidia comes out with a dedicated CUDA driver (highly unlikely) you will not be able to use both cards at the same time.

I could be mistaken but my understanding was that CUDA (as nVidias PhysX is a CUDA port from the Ageia hardware implementation) functionality is only provided as part of the Forceware display package.
As you can only load one display driver package into Vista, it can not run in tandem with an ATI video card providing PhysX support.

If you could prove me wrong that would be great!
I could finally get some productive use from my old 8800GTS 640 alongside my Cf 4850s

There is a separate physx driver available. (voila!) What I'm interested in, is who has done it and what kind of success they've had with it.

Euphoria, I read through the links you provided and you seem to be mistaken (at least for Vista).
In the Mirrors Edge Benchmark, they are using an Ageia PPU, not another nVidia card to run the PhysX.
Also, in the Guru3d forum there is no mention of being able to run a nVidia card for PhysX next to an ATI one in Vista.

It appears that Win7, on the other hand, is capable of running two display drivers in tandem.
From what I have read in the Guru3d forums, the implementation is a bit flaky, as to be expected from a beta OS, but fully functional.

The PhysX drivers linked above can only be used in conjunction with the latest Forceware drivers which can not be installed next to ATIs drivers in Vista.
If you are running Xp or the Win7 Beta, you should have no issues installing and running both cards/driver packages.
Windows Vista, however, is incapable of running a nVidia GPU next to an ATI one for PhysX.