The inventory system does not support syncing physics over network because it’s out of the scope of the inventory system and content. That is why it says Single Player physics based item interaction.
You can turn it on but you will run into some dropped item location sync issues on clients.
If you have a player drop an apple it will simulate physics on the server and client. If the clients apple rolls a little tiny bit different than the client won’t be able to pick it up because the servers apple location is the real location. It will still highlight the apple and say “[E] Pickup Apple” but the Server is who checks to make sure everything is in order to prevent exploiting.
You can sync physics on the server but that would not be a very efficient and out of scope of an Inventory System.
Usually when you see physics in Multiplayer games it’s things exploding and not relative to gameplay so they don’t have to be synced to the exact location.