How many objects can the physics engine handle?

For example, if I had a block stacking and tumbling application, what's the total number of blocks that Unity could render with decent performance especially for the tumbling part?

That depends on your CPU and what sort of shaders you're using, if shadows are on, etc. My computer, which is old, can handle about 700 with a plain vertex lit shader before it starts getting single-digit fps, if they are all moving and colliding at the same time. But your computer will be different.