@NA: Trust me, I understand your thoughts and I know the issues in relying on physics, but I have many ideas of games where physics plays a very important role in the gameplay and of course I don't like to reinvent the wheel and definitely don't like to use raycast on each update to only understand if a rigidbody collides with something, this is the role of a physics engine else it would be completely unuseful. For example my latest game Domino Rally (http://itunes.apple.com/us/app/domino-run/id663200322) is almost completely relying on physics and it works pretty well without any "hack", it just works with forces and physics, so this is an example where you can perfectly rely on physics if it works as expected. I'm almost disappointed that I cannot rely on physics, I'm not the best math or physician in the world, neither I want to achieve a degree in Math or Physics Engineering to make a game (also consider that as already told I'm having very high FPS and unless the physics engine is completely broken then I should have collisions detected as expected because I'm not using very high velocity or very thin objects, I mean the bullet is thin BUT the avatar model is deep enough that it's really impossible that the engine won't intercept the collisions). I'm almost sure that my setup is wrong somewhere, because LE engine should hopefully implement physics correctly. Besides the fact that I'm not interested in porting a game to other engines, in which case I'm perfectly aware that it could lead to some changes to your code (well I implemented a component system and game engine, so if I had to change engine it would require changes to only 1 function, this is "API agnostic" too even if it relies on physics instead of math distance/collision detection).
So to not being forced to hold on, I opted to switch to continuous raycast along the movement of bullet, this is working of course, even if it's not what I was trying to test. So for now I'm following this path and hopefully will release sooner a game demo, just some weeks to build few levels.