well the idea is that every bone that might be able to rotate needs its own physical version of the bone, as the bone has some vertices weighted into it
if you delete the twistbone body in PHAT does it relate the weighted verts into the next bone or the previous one?
but even if that would be correct, rotating the proper bone would result in very extreme rotations for limbs (the very thing that twist bones is meant to fix). so it might end up being a nice animated character that has very rough ragdoll rotations
or perhaps like you say it’s only a matter of setting the constraints correctly. though in UDK’s the constraints couldn’t really be trusted (for me rotating and stretching still happened on constraints with rotation and twist limited to zero degrees, and dampening just made things slower)
anyway I’ll have to try it myself at some point. I’ll get back with results (might not be till next month though, with the holidays and everything)