Cloth deformation physics are fairly standard these days, and are already in the game. Criticising “bedsheet physics” is something media latched onto as a way to generate outrage clicks. Congratulations, you fell for it, and repeated it.

(If you look at the actual progress report that was talking about bedsheets, you’ll note it was from the AI team—in other words, how to make the AI enter/exit beds while interacting properly with the physics engine. Pretty normal stuff.)