Gamasutra hat a chat with Reil about the partnership and what developers could expect from the integrated tools, you can read the article over here.
How do PhysX and Morpheme currently interact, and what will change when the products become more tightly integrated?
TR: We actually ship all sorts of code for Morpheme for the run-time engines, so you can have it integrate with whatever you want, essentially. What we're doing is making sure that the integration with PhysX is very tight. We actually have additional code there to make sure that is the case.
In theory it doesn't prevent anyone from doing anything else, because obviously, it's very important that game developers have complete flexibility. I think what's going to happen is that, because the integration is so tight, what's going to happen is we have PhysX functionality in the Morpheme tool itself, so you can graphically author how your ragdolls interact with your animation, and how supple that animation is. That tight integration we can only get with Nvidia PhysX, so that's not something that's easy to get with another physics engine.