I have heard of very few AVN developers who solely work in Blender. Same with Hexagon.
Agreed....though to be fair....if you take all AVN creators, there is like ...15% actual individual 'artistic' developers, the rest is just playing with Ren'py and creating lewd images with HS or DAZ. Of the 15% only 30%-40% is using animations, the rest is using stills, and of those many still manage with DAZ dformer/smoothing tool or mesh grabber. I mean: Summer Scent, Bad Memories, Desert Stalker, Projekt:Passion, Jury are in their own right. Then there are more top level, who have strong stories, but the game isn't a piece of art in total (story, graphics, immersiveness). Can you imagine I have only three of the above, that make me choke up during play (okay, I'm a 50+ guy that has a lot of life experience). Summer Scent wouldn't do that if the immersiveness was low. Do you need realistic soft body physics? I'm not sure, but I agree that it all looks ('feels') just that bit more realistic. But is the learning curve for Blender worth it? I don't know. I have worked with both, but still haven't been able to do too much interesting with it (exporting model, making it a 'mesh' to drop on the floor with dforce).
That is an excellent argument.
More than realism, I think it's about the details. And the details, even though subtle, can make all the difference. So... do we need soft body physics? No, but if we had it, it would allow us to do great things.
Of course, Details are no replacement for a good story and a decent narration.