However, as particles start moving around faster and faster, the distance they can travel in one time step increases, and the neighborhood of effect increases, limiting the speedup of this optimization. This matters less in larger scale simulations like of weather patterns, because you don't have to worry about air molecules zipping to the other side of the continent in one second. But it matters a lot in small scale simulations, especially in cells. As an example, an average glucose molecule in one of your cells is bouncing around at around 250 miles per hour! That's not 250 miles when scaled up, that's really 250 miles per hour. A molecule in your body is colliding with another billions of times every second. (Source: http://www.righto.com/2011/07/cells-are-very-fast-and-crowde...). At that scale and that level of activity it becomes much harder to simulate each time step.
PS: Also of note protean folding simulations don't even simulate the water surrounding the protean and are again very simplified.
Unfortunately, a useful cell simulation would be far more complex than simple particle collisions and a much shorter step size. But, that's not to say different kinds of simulations can't be useful. And ASIC's or general improvement in computing power can also boost things.
That's what puzzles me about this discussion.
Of course we don't. The goal here is to model more atoms than we have atoms to model with. Until we get to quantum computers that can represent more information per atom, than information per atom we want to represent, it's simply a matter of objectively & obviously inadequate resources. You can't simulate wind shear on a plane when there's more atoms in that wind & plane than there are in the computer simulating them: every single atom being simulated contains the complete information about its state (information independent of any other atom), so simulating it will require at least one atom per atom simulated - if you don't have at least as many atoms to simulate as you are simulating, you can't achieve a complete simulation.
We still don't have the computational power to do certain classes of continuous Navier--Stokes calculations (i.e. not atom based).
The better foundation is quantum mechanics. An example of a macroscopically visible difference between these foundations are the van der Waals forces.
It's a very reasonable idea, and useful enough for computations, but it lacks the essential tension that makes Navier-Stokes a mathematical Everest.
People do atom-by-atom molecular dynamics simulations of proteins and such.
It's not just computational power but memory. There's something like 1E14 atoms in a cell. Storing the x,y,z position with 4 bytes for each dimension (though you'll probably want 8 bytes) comes out to 1.2E15 bytes = 1.2 petabytes of information. Add in more fields for velocity and other pieces of state and you're talking about something that would only fit in working memory in some of our largest machines.