Well sure, I could write my own collision detection using "trace." But that's incredibly slow, and I'm not referring to the time it would take to write.

a) Trace is a very slow command. For a simple scene, what you describe may be fine. But if there are a decent number of entities to track, doing a trace like that for every entity every frame, buh-bye framerate.

b) While I'm doing my custom collision detection, the built in collision detection would still be taking place! Thus, it's doing all the collision detection calculations TWICE for every entity. Talk about a waste

Note also that the undocumented feature is nothing like what you describe. The undocumented feature seems to be just like collision detection with collision hulls, except that each entity has it's own sized "hull" (its bounding box.)