I think there is a bit of confusion about the whole 'physics' issue.
Basically if you want to move something around in the game world directly, i.e. by taking control of it's positioning from within a script, then 'physics' *must* be OFF for that object.
If you instead want objects to react in a physical sense to other objects 'naturally' then 'physics' must be ON for that object and any others it reacts with.
Now in the currently released engine there is no way of moving a 'physics' object (without seriously screwy results) but I have added, a very simple at present, Push command which will simply impart an instantaneous force to an object in a particular direction. I have also added various constraint commands and a SetObjectDamping command which in combination can be used to control how physics objects react BUT as soon as you attempt to explicitly move a physics object (with SetPosition or SetRotation for example) then all bets are off as to what will happen, basically the Bullet engine will probably not like it very much!
What this means is that to drive around in a vehicle of some sort the vehicle itself must be position controlled so cannot be a physics object (I supposed you could make it a physics object and 'Push' it around but controlling it would be a nightmare) but the player cannot really just sit in it, instead the trick is to take control of the camera directly and move that as well. The 'player' can either be 'transported' around along with the vehicle or simply moved out of the way whilst you do the driving bit. Also though you need some way of ensuring that the vehicle object doesn't drive straight through objects on the map, there are various ways of doing this but all require a lot of planning and clever scripting.
Anyhow, I am about to embark on another vehicle script effort which I hope to make a lot more generic than previous efforts and more useable, stay tuned!
Been there, done that, got all the T-Shirts!