OOOh! PhysX on the iPhone. Big deal. I'm sure Crysis could work on iPhone too, although at low,low,low settings and with a horrible frame rate, but it could work.
As for plugging you're iPhone in to handle PhysX, I'm afraid you're missing the point. This is a software based solution and is not hardware based like on the Geforce 8, 9, and 200 cards. This is basically a PhysX middleware, or API, written for the iPhone so app and game designers can easily include PhysX instructions in their programs. This is actually very smart of NVIDIA since Intel is not only being docile with their acquired Havok physics technology, but will more than likely only target Havok towards Intel processor markets. By getting an early start with ARM processors through the iPhone NVIDIA is really solidifying PhysX as THE physics API to use.