I think Ive tracked down the problem.. Not that I understand why it doesn't work! But when I take a character model off the level, everything starts functioning perfectly! Even if no action was assigned to him (I was suspecting something in his action was bogus)

So, basically, I have a level with a big hollow box, a ball (with physics). When I add this model, (even with no action assigned to him) nothing works, without it, everything works!

What am I missing here?