I belive you have physics mixed up with collision,
physics controls such things as
gravity
velocity
buoyancy
density
the reason why the camera passes through a enemy in fps creator is because the collision detection is turned off between the camera and the enemies, this was probablly because of enemies animations not reacting the way they should have durning collision or the ai with the camera in the EA.
I think i read that in v1 collision will be on the enemies, don't really see how it can't be though since v1 is said to support multiplayer, i would guess that instead of just a camera there would have to be a character controled along with the camera, since it wouldn't make much sense to have a death match with only cameras and guns. As to the physics engine who know's maybe they wrote there own, awhile back i thought i remember reading that it would be a 3rd party engine but only tgc know's.
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