i'm not sure either what the first game was. I remember though the physx cards used to be stand alone seperate cards and were not integrated into the nvidia cards... so that really hurt physx from taking off properly. it looks pretty cool for some games that do use it, but if a game is properly designed to use the cpu to do the physics, physx is useless really.
Worst laggy physx game i've played is probably Alice Madness Returns, it chugged badly with it enabled on highest settings, and i have overclocked 680gtx and 4770k i7 cpu... but that whole game was badly optimized on pc even with all the physics turned off... the game required a fair bit of config file editing to run good.
Best physx usage in a game in recent memory is probably Borderlands 2.... if i ran the game using cpu for physics, i took a pretty big fps hit, if i enabled physx support i gained a lot of fps and the physics looked better... thats the kind of thing you want to see.... its too bad so few games use it. Could run the game at 2560x1440 and rarely any fps drops below 60fps... pretty well optimized i think.
Also another well done physx game i thought was Mafia 2, it made good use of the physx power and in shoot outs crap would fly all over the place and make a real nice mess of the objects in the environments.
edit:
from that wiki you posted i read it, and it looks like a game called Switchball (Crazyball) from 2005 was the first to use physx (when it was first created by Ageia before nvidia bought its tech out).
http://en.wikipedia.org/wiki/Ageia
http://en.wikipedia.org/wiki/Switchball
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