From what I understand, the biggest limitation is hardware related, as a game with such physics simulation would need a seriously cutting edge CPU which is not something most people afford.
No, you could make everything destructible, it just doesn't make sense gameplay wise (or reality wise).
UE even introduced some supposedly optimized system for that recently:
It would open up so many options, possibilities not just for action games, stealth games, RPGs and others but in general, in RTSs, RTTs, multiplayer games.
I'm all ears, please list such options in all those genres. RPG for example, how can Age of Decadence benefit from everything being breakable?
It's fun, it doesn't have to be realistic. It's a game after all.
Anyway, for those genres there are plenty of scenarios, I'm gonna mention only a few:
FPSs/TPSs: making shortcuts on the map by destroying walls or other obstacles, making high caliber weapons penetrate walls allowing skilled players to take precise shots at others even behind cover, using vehicles with high speed to drive in a direction and jump out letting said vehicle to break through/cut a path through enemy forces or structures (you could even plant bombs on it so you can detonate them after, like in Far Cry), hunting down a target that hid in a building protected by enemy forces and if you're in a helicopter you could just fire missiles at the building destroying it and everything inside or simply fly above it and parachute out letting the helicopter fall on the roof of the building, crushing it and everything inside and various others. This would work very well in GTA for example as you have many vehicles and a large map.
Stealth games: creating entry/exit points into a facility, using drones to to scout as well as disabling lights that normally cannot be shot or taken out in any other way by simply destroying/cutting the wire connecting the light to the power source, accessing vents that are normally inaccessible, destroying locks if you can't pick them, using a loud explosion to create a diversion as well as an entry/exit point into a place, destroying parts of the level to prevent or alter NPC patrol routes, again using drones to disable a security system or generator, causing a temporary blackout allowing you to move, complete objectives undetected. Just off the top of my head.
RPGs: investing in strength allowing powerful characters to crumble walls, destroy support beams, pillars causing the ceiling to fall on enemies, breaking down doors, push heavy objects, throw them on enemies or rooftops creating an access point for a more agile character, destroying various walls therefore bypassing checkpoints or ambushes. It would depend on the level design and verticality as well as NPC placement to choose how/where to use this feature.
RTSs/RTTs: in most RTSs, when moving armies, they have to go around forests, rivers, mountains, hills etc instead of using artillery to cut a path through forests or altering the course of a river by destroying a nearby tower for example causing to fall over and temporarily block the flow of water or by shelling and making a hole in the ground where some of the water from the river can accumulate allowing temporary safe traversal through shallow water (again, it doesn't have to be realistic), in Desperados, using the guy with the dynamite to blow up a building filled with enemies, or carrying a barrel near a wall and detonating it, or using a minigun to shoot inside a building killing everyone in there, using Sanchez to break down doors, smaller fences and whatever else, in Commandos, using your spy to infiltrate and plant explosives to allow your other characters entry, destroy generators, lights, walls, buildings, lookout towers etc. Haven't played it in years so I don't remember much from it.
All of this stuff can be applied to these genres, not be limited to one. And it would depend on the game, the level design, the verticality.
In Firaxis XCOM 2, you can destroy a turret by blowing up the floor and causing it to fall. Enemies take fall damage as well. You can cut a path to extraction instead of going around large buildings. This also has a chance of starting fires that spread and further destroy the building.
In a Lost mission, if you get swarmed you can climb into an abandoned apartment building and blow up the access stairwells to prevent them from reaching you allowing you to farm them and wait for extraction. Again, only a few examples.
I don't understand why I have to explain this. The advantages are numerous and, to me, very obvious.
Realism shouldn't be a concern. Realism is why we went from GTA SA to GTA 4.
