Thanks for all the replies
@Radikalizm
I have no idea how they do it either. I think dmm uses shaders, but I haven't really touched shaders much so that is over my head. I have no idea how havok does it, but I'm assuming it's similiar.
@Brainsaw
While it doesn't seem that hard on a simple airplane, like you said, it probably won't work that well on a big building. Unfortunately my primary use for the destruction would be on big buildings

Your ode wrapper is very nice and if you could get some destruction in there I would probably use it for this project. The only reason I said I'd prefer bullet is because I have the most experience with it. So I am open to any engine.
@Bear_130278
Sorry I do not use 3d studio. Thanks for the reply though
All that being said, I had a look at physx and they seem to have a very nice destruction system. But when I went to download it last night I found out that you have to be part of their developer program or something. So I signed up and just got the acceptance email about 5 min ago. Unfortunately I don't have access to my computer for the next couple of hours(typing this on ipod) so I am patiently waiting to download and test it out.