Physics engines are used for fps's all over the place. I would assume that it's best to not use it too often though. Ragdolls and interactive environment objects like crates and tables are the best uses, but there can always be room for more.
I'm planning to have the animations in my big game done with a significant amount of ragdolls, so that if you were to brush past a guy's arm, it could sort of move in reaction. I doubt it'll work out very well, but it's worth a shot.
Anyway, my point is, I think that physics go well in any genre - Even puzzle games. A physics engine gives people something to relate to real life, and they can be very realistic compared to most other aspects.
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