The collision algorithm of the ODE physics engine is not as accurate as it could be. It checks every frame to see whether the physics object has penetrated a barrier. If it has, then it pushes the physics object away from the wall/floor/object/whatever. What's happening with your "bouncing objects" is a direct result of this. I would recommend setting ph_fps_max_lock to whatever FPS you're getting (or at least an average, if your FPS isn't constant), and this probably should minimize your twitching.

Code:
void main()
{
    cout << "I am MrCode,";
    cout << "hear me roar!";
    system("PAUSE");
}