@Darren S - I think I understand what you are saying...
First of all, let's get the physics out of the way! As you are no doubt aware it it possible to run physics simulations on the GPU these days. However, this is not the case here (the GPU is purely being used to trace the rays/paths of light bouncing through the scene and ultimately generating the resulting image). My little physics simulation is running on the CPU. I take the results of the physics simulation and 'mirror' them to their corresponding GPU counterparts (effectively updating their positions, velocities, etc). The results of the CPU simulation have to be uploaded to the GPU each frame (the physics simulation is running at 60 fps independent of the rendering frame rate). Due to the fact that the physics simulation is quite simple - and running on a rather tasty CPU - the performance hit is pretty much negligible. Consequently, the dynamic nature of the balls don't impact much at all on performance. It's the rendering of the balls that really impact the performance in a significant way.
If we consider the balls in the first part of the demo there are several different materials applied to them. It's in the realisation of these materials where MASSIVE performance gains or losses can be found, due to the complexity of the mathematics behind them. Likewise, the complexity of the materials and how much of the view is covered by those complex materials also makes a big difference. If you are rendering a single ball that is some distance from the camera then it might only cover an area of, say, 10x10 pixels (100 pixels) in total. However, if that same ball is right in front of the camera and occupying the entire view then you suddenly have to consider, say, an area of 1920x1080 pixels (2,073,600 pixels) for a HD display. As path tracing is performed 'per pixel' then you suddenly have MANY more computations to crunch through.
The following materials types were used in the demo - diffuse, metal, emissive, 'coat', ideal specular, ideal refraction - and they all have varying levels of computational complexity and cost. The ideal specular material (i.e. the mirror chrome-like material) is quite 'cheap' to render compared to the ideal refraction material (i.e. the glass-like material) for example. I'm not sure you'd be too interested in the reasons why so I won't go into detail here as it might get a bit boring!
My point is that some materials are considerably more complex to simulate and the more pixel area those materials cover, the more the performance is impacted. In terms of ray/path calculations we are talking in the billions and trillions of calculations per frame. The numbers genuinely are astronomical.
Another factor impacting the performance is the number of 'bounces' a path can take through the scene. The more bounces a path takes, the more realistic the result (at the expense of computational cost). Consider a ray is traced from the camera and into the scene. If it hits nothing in the scene then the camera simply takes the colour of the environment and moves on to calculate another ray. However, it might hit an object. That's a bounce. At that hit point we need to query the material properties to determine how the ray's path is affected. Is it reflected, is it transmitted (e.g. through glass) or something else? Let's assume it's a mirror material so the ray's path is reflected based on the angle of incidence. That newly created ray then continues the journey through the scene. It might not hit anything else at which point it escapes into the environment and we start again with another ray. But, that new path might hit another object. That's the second bounce. We go through the same process of querying the surface, determining how it affects the ray, and so on and so on. The more bounces that happen, the more accurate the generated colour for the pixel being rendered. The bounce count can be imposed by a hard limit or sometimes analytically (I use a hard limit). I generally impose a limit of 4-8 bounces for 'pretty' renders. Pixar used 10 bounces for Big Hero 6 as it required that many bounces to provide a suitably realistic appearance for the white inflatable suit.
With respect to your question on people walking up and down the alleyway and the impact on performance... yes, it would adversely affect performance. It's not really possible to say by how much, though. It (again) very much depends on the complexity of the materials used to realise those people. Geometric model complexity would also add cost (i.e. more polygons mean more intersection / hit tests have to be performed by the GPU to determine if rays hit the geometry or not). Due to the recursive(ish) way that path tracing works the reflections would happen automatically so the balls wouldn't need any additional information to tell them to reflect the people walking in the alleyway.
Real time path tracing (as I'm doing here) really is sensitive to material and geometric complexity. It's so very easy to completely use every bit of performance the GPU has to offer (and then some) resulting in horrendous performance dips. I've caused the GPU to slow to such a degree that the Windows watchkeeper process thought the driver had crashed and thus performed a GPU/driver reset (completely crashing the renderer!)
TL;DR - it depends.