I've gotten it to work pretty well Chenak. I've found that if I reset the AI Entity position every loop then it goes crazy. It looks like every time you reset the position then it resets the entity action, which drives it crazy.
I only reset the AI position if it gets too far away. My character is 60 units tall and I reset it if it gets more than 100 units away. Otherwise, I have the physics body turn toward it, move toward it, then I rotate it back to the AI Y angle.
Like I said, it's not perfect, but it looks good. Sometimes the AI entity is standing behind a table and the player character is trying to walk backwards to the position, which can be odd. But it's not terrible.
If I'm right about the issue with Dark AI then it is a bug. I'll play around with it and file another bug report if that's the case. Of course, all of my bug reports tend to get ignored even though they're clearly bugs.
If you don't want to mess with your code, I'd be happy to fix it up for you. Just send me an e-mail.
Come see the WIP!