What's wrong with http://www.youtube.com/watch?v=PjqsYzBrP-M#t=01m25s?
EDIT: Grrr, stupid youtube advertisemants won't let me link to a specific part of the video. Anway, when the person is walking through the town with the mill the cloth physics look perfectly fine to me. 1m25 seconds in
Oh, there's absolutely nothing wrong, except that i'm not seeing any cloth or hair physics. All the clothing and hair in the trailer looks like it's just glued to the character's body, and matches every motion of the body perfectly, rather than moving naturally like actual hair or clothing would.
So at least going by the trailer, it doesn't look like there's cloth or hair physics, I could be mistaken, of course, as the trailer only has a few scenes where these things might be easily noticable and they all end quickly, and screenshots are usually not a good place to judge physics from unless they're in conditions where physics would be very obvious even in a static image, like say, if you had a long haired character whose hair appeared to be blowing in the wind, that might indicate the presence of hair physics, and if the same character was hanging upside down and the hair was completely static and seemingly glued to the body and head, then most likely, the game lacks hair physics, but none of the screenshots have showed anything that extreme.
And yes, it would be nice to have hair physics, and cloth physics, but at this point, it doesn't look like we'll see them, and there may be a number of reasons we wouldn't, maybe the version of Havok physics Bethesda is using for Skyrim wouldn't be able to pull it off well, or maybe they decided it would be too hard on the proccessor, maybe there's some other reason, I don't know, I just know that I believe it would be nice to see them, but I don't believe we will.
Aside from making hair and clothing look more realistic, having proper hair and clothing physics could potentially allow for longer hair or beard styles, and cloaks, affording players more customization, I suspect the reason why we didn't see cloaks in Oblivion is because Bethesda felt they wouldn't look good without proper physics, and if Bethesda still can't do the physics for them in Skyrim, than we probably won't see them.