This feature was mostly ignored by the playerbase because developers found it easier to create static setups and focus on iterating on other parts of their gameplay.
The problem is the opportunity cost of destructible terrain was too high. Developers could get fun for lower effort by creating linear levels with better design/graphics/etc as destructible terrain makes everything "blocky" without significant developer work.
Yes, as a game it had a lot of flaws that many other games also had, but the things it excelled at were absolutely unique.
Everything has weight and flows spectacularly. They used a combination of key framed animations and procedural to have limbs conform to surfaces and have additional physics applied when needed. Combined with the physics system on the characters feathers and clothing, it all just ties together very well. It had a long development time of 9 years, before that became almost a standard, and it was basically just spent perfecting that system.
It also helps that they threw the bulk of the GPU time on the giant character to give it highwaulity shadow and highlights to ground it in the environment so well.
But the environment is a little bit of a let down in that the assets are clearly from the original Ps3 version they were working on. They cleaned it all up well enough with decent enough AA with everything being well 'grounded' but there was only so much they could do. There are a lot of assets that show the original memory limitations.
The problem was that the frame rate would drop terribly due to a lot of their decisions. And this is after they reportedly they had to significantly reduce the animations system capabilities over the Ps3 version because it was original designed to work with the Cell's strengths. Also took over a year just to port from the Ps3 to Ps4 due to the hyper specific tech they had built. Probably one of the few titles where the Cell's strengths shone well over the Ps4's architecture. If feels like if it was done today with modern GPU tech, they could do something amazing with this. But I think it is going to be permanently stuck on Ps4.
If you haven't played it, I wouldn't give it a hard recommendation because the gameplay is very fiddley in trying to conform to the animation system and most people just don't really get into the vibe of it all. But do check out a few minutes of it in action on Youtube and just to see how it all flows.
It is an wonderfully flawed ambitiously frustrating masterpiece. The vision is strong, some of the tech is strong, but the gameplay is a little weak and some parts of the tech is weaker.
I do see that the creator Fumito Ueda with Gen Design has a new title being funded by Epic called "Gen Altus" and it looks like they are taking all their skills over to UE5, it is going to be fun to see.