I don't use Physical dynamics very often but have found it very usefull for simulating assembly of tight fitting parts, ie "is it physically possible to stick this in there"
Today I've needed this ability again but in 2004 I find that physical dynamics, regardless of the sensitivity setting gives up as soon as it touches something.
Basically, when contact is made it stops and says "physical dynamics cannot find a solution and has been disabled"
Weird eh? I'm just checking if this is only me.
Zander