For 2D physics you should use a 2D physics engine like Box2D or Chipmunk. They are easy to use and much more efficient than abusing a 3D physics engine for 2D physics.
I think Box2D has more features but Chipmunk is a bit faster and written in C so probably it is less effort to use it with Lite-C.
I dont want it to explicitly be 2D physics, i want to be able to switch between either whenever i want real-time in-game...
That's the whole reason I wanted to have axis locked

thanks though anyway

regards,