(quietly drools)
...I've wanted something like this for years. I'm not sure if current 3D engines could handle too much, but maybe...
3D, 2D, whatever. I just want something where I can kill people through sheer force of INVENTION.
I agree that a Steampunk setting/asthetic would work well.
Remember: Physics don't have to be REALISTIC, they just have to be CONSISTANT and INTUITIVE. Simplification is great if it still "feels" right.
Example weapon: Two pipes joined at an angled joint like a lowercase "y". High pressure gas/vapour (probably steam or whatever) goes down the long pipe and out the end. The other is filled with ball-bearings that barely fit. Ventauri effect turns this into a machine gun, as balls are sucked in, accelerated, and projected at the fools outside!
Example engine: electric motor pinned to a rubber cylinder. You have a wheel. Make four and wire the left together, right together. You have drive and steering now.
Example engine 2: Nozzles that shoot aresolized alcahol/oil/whatever over a heated wire make rocket boosters. Place on a hovercraft and profit?
Generaly, what is needed is:
Materials. Rubber, wood, steel, etc.
Shapes. Primitives, tubes, etc. made out of a material.
Constraints (a way to stick shapes together)
Simple actuators/whatever to transform energy from one form to another eg. a motor that is attached to electricity applys torque over a constraint or a piston that is a shape that stretches when attached to a pressurized fluid
Fluids. Water, oil, steam, magma, etc.
A physics engine that can handle rigid body collisions, strong welds, hinges, and do some form of fluid calculations (Pv=nRt for gases transfering, level seeking for liquids) or some abstraction thereof for fuel lines/etc.
Knight of fools? That description gave me tears in my eyes. It's just so tragicly EPIC and matches what I've wished for for so long...