Will this engine be available for free or commercially?
I think it will be free someday, but not soon. First I must finish the engine and then write documentation for it - this is a very long road.

...and what are the chances of it working with a standalon FPC setup
That is my goal to make the engine as a standalone application (Game Module + WYSIWYG Editor) and add some scripting language.

Why not do a HD video and post it via youtube so we can see the physics portion in action?
When I do physics for vehicles and a few more models, I will try to do a HD video and post it via youtube.
For now I have only one tree, terrain, human and house model - nothing special for good looking video