A little video demonstrating my current project in real-time. I just put in physics, so it doesn't behave perfect just yet, but it will soon.
For physics, I used JigLibX, which was pretty easy to set up, and so far has produced enjoyable results. The only thing that particularly scares me about it is the version.
http://www.codeplex.com/JigLibX
Terrain is based off a very nice tutorial you can find here:
http://www.ziggyware.com/print.php?ty...
But I've made some pretty large changes, to add in support for terrain editing and such.