Life is a wonderful example of self-assembling molecular nanotechnology, and as such gives you a template of the sorts of things that are actually possible (as opposed to Drexlerian ideas).

Except that Drexlerian ideas are very alien compared to life, and are also physically possible (according to Nanosystems).

That is to say, everything is built from a few dozen stereotyped monomers assembled into polymers (rather than arranging atoms arbitrarily), there are errors at every step of the way from mutations to misincorporation of amino acids in proteins so everything must be robust to small problems (seriously, like 10% of the large proteins in your body have an amino acid out of place as opposed to being built with atomic precision and they can be altered and damaged over time), it uses a lot of energy via a metabolism to maintain itself in the face of the world and its own chemical instability (often more energy than is embodied in the chemical bonds of the structure itself over a relatively short time if it's doing anything interesting and for that matter building it requires much more energy than is actually embodied), you have many discrete medium-sized molecules moving around and interacting in aqueous solution (rather than much in the way of solid-state action) and on scales larger than viruses or protein crystals everything is built more or less according to a recipe of interacting forces and emergent behavior (rather than having something like a digital blueprint).

You are generalizing to all of physics from the narrow band of biochemistry. Biochemistry is aqueous, solvent-based, room-temperature-range, and evolved. It is not comparable to e.g. printed circuitry on a silicon chip.

So yeah, remarkable things are possible, most likely even including things that naturally-evolved life does not do now. But there are limits and it probably does not resemble the sorts of things described in "Nanosystems" and its ilk at all.

There are sure to be limits. However, the limits are probably nothing like those of life. Life is kind of useful to point to as an example of how self-replicating systems can exist, but apart from that it is a very misleading analogy. (At least, if we're talking about hard nanotech, which is what MNT usually is used to refer to and what Drexler focuses on. Soft nanotech that mimics or borrows from biology is incredibly interesting, but different.)