PhysX still exists. Nvidia developed a programmable architecture for their cards known as CUDA, which allows the physics hardware acceleration (PhysX) to be performed on the GPU instead of requiring separate hardware. PhysX is the only hardware physics acceleration package I know of, which really gives Nvidia a leg up in my opinion. However, Blockland's brick physics don't make use of CUDA / PhysX.
Now, to address the topic:
Is there any way to force physics to not cut out if framerates will turn for the worst if it continues to operate?
Badspot intentionally makes things so people have as few ways as possible to turn the game into stuff. Brick physics will always be disabled once your computer starts to show a noticeable performance difference. You might see some tweaks in a future version which make the physics more efficient; otherwise, get better hardware.
