Can we assume that you are trying to get the same results for the simulation on all clients? If so I think you need to explain your reasoning why having them all doing different calculations would be a good idea!
Or perhaps you meant that all clients will do the same calculations, but the timestep will vary during as the simulation progresses, but that is quite the headache to implement and debug. For each client to come up with the same (or at least similar) result, they will need to be using the same length timestep for each step, so you will need to send this across the network too, eg. physics step 32241 is 16ms, step 32242 is 18ms. Apart from requiring extra network traffic, each client does not know what length timestep to use until it receives this information. And where does it receive it from? Presumably the slowest client will dictate how fast everybody should be going? I can't see it working any other way. So client also have to continuously let the server know how much processing they can handle, and the faster clients will be dragged down to that level of performance.
But as Steven says, there will also be other problems even after these technical difficulties have been taken care of. Most notably the effect of gravity changes with different timestep lengths, so for example in a platformer, the height your players can jump would be continuously changing. If there are platforms that are normally just reachable, they might suddenly become unreachable when a slower client joins.
If you really did mean that each client will use just whatever timestep length it feels like, that would work but the server would need to send out an official snapshot of the world state at very very frequent intervals to get all clients snyced. Technically this would be much easier to implement, and each client would run as smooth as it could, but with more jerkiness as the world state is corrected to the official one, for clients that run either faster or slower than the server does. Hm... maybe this is the best way after all. You might be interested in this article explaining how Quake3 does something like this: http://trac.bookofhook.com/bookofhook/trac.cgi/wiki/Quake3Networking