Well, I think we all should underestimate source that quick, since it's really a fantastic engine, probably the most versatile one in the current gaming industry except Carmack's engine...
What stands out the most are the DX9 effects, like when you leave a dark room to a sunny enviroment, the sun hurts your eyes, explosions, fire, water, etc...
The physics aren't really that poor, their just Havok 2.0 without much customisations, object do have volume, friction and buoyancy, that's just havok!
What I really think sucks the most are the shadows, they're even worse then Max Payne, and don't soft shadow
I saw a HL2 vid where a huge container was dropped onto a soldier (at the seashore), the magnet of the crane holding the container casted a shadow on the floor right through the container itself. While the container ofcourse should block have blocked that shadow.
However, source has some of the most advanced techniques up their sleeves, mark my words it's going to rock every gamers world!
.... they won't top Carmack's engine though, he's got everything covered, he had more cinematic effects in for doom3 in 2001 (Mac Expo) then HL2 has now ... gameplay shall decide the winner of all discussions going on for the last 2 years
just my 2 cents...