Not sure why you think phy rotate does not work as this little demo shows it going, now it could be that you are using it in another way to what I show here, so how are you hoping to use it?
Also the Character Controller is one hard beast to understand, if you download the SDK you might find some code that show how they make it work and how DarkPhysX use it.
Rem ***** Main Source File *****
sync on
sync rate 60
autocam off
position camera 0,5,-5
point camera 0,0,0
phy start
make object cylinder 1,1
phy make rigid body dynamic box 1
make object box 2,100,1,100
position object 2,0,-1,0
color object 2,RGB(255,128,0)
phy make rigid body static box 2
do
phy set rigid body rotation 1,x#,y#,z#
inc x#,.1
phy update
sync
loop
Dark Physics makes any hot drink go cold.
