I dont think you can generalise it like that...
The interia tensors will change along with changing the shape, also, most physics calculations you find on the internet are convex-object based and if the object (by way of deformation) stops becoming convex, your in dead water as they say...And you do realise ODE doesn't have yet stable dynamic convex collisions? So thats out of the picture. If your planning this for heightmaps, then every time you change the vertices, your going to have to send them down to ODE to recalculate everything (time waster).
If you have ever played the game FlatOut, they do car-deformations, probably using a similar argument to yours. However, if you look closely enough, you will notice that the physics objects of the car dont change (at least in dont think they do from my perspective of the car).
What I think they do is obtain the generated contact points that Havok produces, do a simple search to see what are the nearest vertices to those contact points and do what you did with the mesh, move it backwards in the negative direction of the contact normal...Ofcourse, they only do that to a certain degree, and force calculations are taken into consideration for deformation.
Can you see ive done something like this before?