After using AMD cards for the last five years, I switched back to nVidia this September with a 2070 Super. However, when I would try to play Arkham Asylum via Steam, it would say that PhysX wouldn't work, despite having both the latest and Legacy drivers installed.

Is this still an issue with the GOG version? No issues with PhysX in Arkham City or Arkham Origins. Only Arkham Asylum. Is it because I'm on an RTX card, and not a GTX card (I had a 660 Ti and 670 previously)?

It's just a general driver issue with recent cards. Nvidia has totally neglected physx support recently. You can still enable the effects and they will work, but they will run on the CPU and lag.

So glad I dumped Nvidia years ago.

I solved issue with this by installing older legacy version of physics
PhysX-9.13.0604-SystemSoftware-Legacy
I was also experiencing weird texture distortions of everything that had physics in it without this. Now its working fine on 165hz

Win10 21H2