However, I'd recommand double precision for physics, because of the less rounding errors (and bienator's argument considering restitution
With (OpenGL) Graphics I'd go for floats, especially for dynamic geometry/textures to reduce the BUS traffic.
Well, I don't know, how important the conversion between the graphics- end physics engine's values is. A physics engine can't live without tghe use of some graphics engine. And if the graphics engine works with floats and the physics engine works with doubles, any values pushed around between them must be converted. I don't know, how important this is, since I have no idea, how big the amount of transferred values is comapred to the amount of "internal" values.
Another point is, that in the future there might be physics hardware (already awailable) similar to a graphics card. Such a physics board is connected to through a similar API like OpenGL. So it will be the same for physics: everything must go over the BUS. In this case floats would be faster.
As my old physics teacher always said: "Precision is not very important. Having the third or fourth decimal place correct is absolutely sufficient. The precision imporvement is so minimal, if you do more precise calculations, is is absolutely not worth it." Well, I guess, floats are at least sufficient for now, maybe even better because of the above arguments, and will be more beneficial in the future, when we all use physics hardware.