if i remember correctly i read a post by julio in which he stated that ngd has no problems with singular matrices. we don't know much about newton's internals but fact is that while working with it you will curse less than with other physics engines.

btw. -> http://www.physicsengine.com/forum/viewtopic.php?t=376&highlight=

...the other physics engines shouldn't call themselves rigid body dynamics but spongy body dynamics or something like that!