There are some new Generation Games that have this new feature implemented, and they are using DirectX 10 to also make this happen among other features.
Will Terrain Deformation be possible in ArmA2 engine?
Will we be able to cover in a bomb crate?
Can we use a shovel and dig a trench for cover?
If this feature could be possible would it make ArmA2 more realistic?
What problems could Terrain Deformation represent? (in every aspects)
Terrain Deformation Demo Video
PS- Is it too soon to talk about this feature?