That means, PhysX only works on a system with no AMD video card installed, which is false. Lots of people played batman with AMD cards, and PhysX is executed on CPU.
You explained yourself, Nvidia video card won't act as a PPU when the system consists of mix-video cards. That is very different from PhysX cease to work. You described the part of the mechanics that stops Nvidia card to stop acting as a PPU, which I already stated. There are lots more mechanics like that, like voltage guard. It will work if you bypass it by any means, but it is there to prevent damage to the card. You may say that it is there to stop people from overclocking a cheap card to the level of an expensive card, but that is your opinion. You may say that the existance of DRM is solely to prevent people from using Nvidia as a PPU along with AMD video card, but that is also your opinion. My opinion of the existance of DRM is if it isn't there and something goes wrong, then all finger points at Nvidia. If it is there and something goes wrong after bypassing it, the finger goes to somewhere else. You may say Nvidia doesn't support PhysX on configurations consisting AMD video cards, which is true and Nvidia said it themselves.