COD4Forums has posted a message from a Infinity Ward developer that seems to explain how they are dealing with RagDoll in COD4.
"I wish I could be there to see your face the first time you see someone die...the death animations STILL make me go "OH S&*T" whenever I see them...and I've been seeing them for over a year. And it was mentioned in a magazine article somewhere so I can talk about it....
...we have a fully realized physics system which includes ragdoll - but you'll never actually notice it because thankfully our ragdoll 99% of the time doesn't look like "ragdoll". If you go back and watch the trailer you'll be hard pressed to pick out a spot and say "that's rag doll" - but it's all over the trailer."