So ... I worked at Volition for Saints Row 2, (developed at the same time) and then also on Red Faction Guerilla, and on the sequel.. and well let's talk about "the incredible destruction mechanics."
First, I played the game recently, and maybe it's just I know how they make the pudding, but to me I don't feel that destruction has truly stood the test of time. But that's just my opinion. It's still pretty cool, but you know, 8 years later it doesn't look that great.
So let's talk about what it took to make RF: Guerilla. That game was developed for about five years with a majority of that time being spent on the tech, heavily developed by a great team. I remember Eric Arnold did a HELL of a lot of amazing work to make the physics of everything work, but ultimately a lot of people worked on the game.
But also realize they spent 5 years to make it look as good as it does, and five years is a long ass time to make it look that good especially from a AAA industry perspective. But destruction isn't even the story that's just the feature we finally got into the game. The story of the difficulties with it is actually two issues.
A. AI. The AI in that game is amazing in that it totally handles destruction (though in hindsight it's a bit poor as it doesn't use destruction itself that often) but to make the AI understand it could go through a wall, could shoot through a destroyed wall, could see the player? I'm amazed at everything we did do.. because it's amazingly new tech.
B. Design. The real problem in the development process was we kept trying to tie "how do we make destruction fun". I went to a lot of lunches where that question kept going around the table while we were eating at Dos Reales (A mexican restaurant in Champaign, good, but now that I'm in California, it doesn't hold up as much, god Mexican food out here is SO good).
You can see the problem with Design in the final game. Destruction is cool right? But we couldn't have the world at the density as Saints Row 2, in fact the world as it was in Guerilla was about as dense as they could get it. Armageddon was moved underground because it was thought it could help add to the destruction. Which it did, but you can be the judge if that's a better game.
It's not necessarily memory that holds back the game, but the fact is calculating and evaluating destruction is HELLA expensive on the processor. There was a few early tests where we showed how easily it was to just grind the game to a halt. The real problem is if you had a building close to another building and blew the "final" chunk out of your building letting it collide to the next building, you could have two massive structures collapse at the same time. Of course with enough buildings, explosive barrels and such you could create horrible chains that would cause a lot of destruction and kill the CPU you were running on.
This doesn't even get to the PS3, with their SPUs and fun times with that... but that's not really my area, I just heard a lot about that.
Eh I've rambled enough, but the short version is "Destruction takes a long time to implement, a long time to design around, and a long time to process on the computer. It's an expensive process in every way, that while very cool, doesn't really work when you're trying to do anything else at the same time." I mean look at the insanity in Saints Row 2, and the lack of pretty much anything to do in Guerilla. Guerrilla is DEFINITELY the technical feat for the studio, but Saints row 2 is the better received game... So... there's that as well.