This is my first time presenting my project on the Bullet forums but it's been on the Ogre forums for a while. It uses a volumetric representation to allow for fully destructible environments, and now has Bullet integration to allow bodies to interact with the world.
The bullet integration is at a very early stage and needs some optimizations but it basically works.
Demo:
http://www.david-williams.info/linked_f ... csDemo.zip
Runtime (install if you have a problem running the demo):
http://www.microsoft.com/downloads/deta ... laylang=en
YouTube Video:
http://www.youtube.com/watch?v=qmZrdBBQThk
Higher Quality Video (Encoded with XViD):
http://www.david-williams.info/linked_f ... moXVid.Avi
Screenshot:

The project is really two projects:
PolyVox Library: The underlying library which stores the volume representation of the world and is responsible for generating new meshes when the voxels change. This library is independent of graphics or physics library and the idea is that anyone can integrate it into their own engine.
Thermite Game Engine: An experimental game engine to showcase PolyVox technology by combining it with Ogre and Bullet.
Actually this separation is not quite complete but should be within a few weeks. Note that the code is not easily buildable on either Windows or Linux at the moment (you really have to know what you are doing) but as the separation proceeds and the code gets neater this should change.
Both projects are under the GPL, though I am considering changing this to something more liberal. But I need to think about this some more.
The corresponding thread on the Ogre forums is here: http://www.ogre3d.org/phpBB2/viewtopic.php?t=27394
Anyway, let me know what you think!