Start From Here--PhysBAM

Hope the day in which PhysBAM can be open source!!!! 

PhysBAM is a multiphysics simulation library, capable of simulating rigid & deformable bodies, compressible & incompressible fluids, coupled solids & fluids, coupled rigid & deformable solids, articulated rigid bodies & humans, fracture, fire, smoke, hair, cloth, muscles, as well as many other natural phenomena.
I just noticed that several parts of the PhysBAM library are open source and for public download now:http://physbam.stanford.edu/

PhysBAM_Tools, PhysBAM_Geometry, PhysBAM_OpenGL and PhysBAM_Ray_Tracing.

The license seems to be a 2-clause permissive BSD license. The project has been used in movies and lead by Jon Su and Ron Fewkiw from Stanford University.
How To Get The Code:
http://physbam.stanford.edu/links/getcode.html
Downloading and Compiling the Code:
http://physbam.stanford.edu/links/download.html