At this point I think its probably a bug, but hopefully I am doing something wrong.
To simplify the problem lets say I am trying to rotate object towards its velocity:
So in the blueprint it works without problems: place that actor in level and shoot it, it always faces the velocity direction
But when I try to create an actor/scene component so that I can make the behavior reusable, it breaks and and creates problems, especially with location.
Create actor/scene component and create a variable of PrimitiveComponent reference to get velocity and set rotation
Apply this scene component to the same cube and set comp reference to the cube in constructor
Place it in level and apply force to see results - rotation jittery, location not updating
The conclusion I am drawing is that when setting rotation of physics simulated component from blueprint it works fine, but when doing the same from actor/scene component it messes up.
EDIT: I have moved this to AnswerHub bug reports here