By default, physics simulation of a SkeletalMeshComponent is disabled on a dedicated server, so as to save resources. It can be enabled by setting USkeletalMeshComponent::bEnablePhysicsOnDedicatedServer=true (see Enabling SkeletalMeshComponent physics on a dedicated server can fail subtly, leading to erratic behavior - World Creation - Unreal Engine Forums for some issues). However, PhysX is internally simulating the skeleton no matter how this flag is set: bEnablePhysicsOnDedicatedServer has no effect on PhysX level.
This can be seen by connecting the engine to the PhysX Visual Debugger (PVD) and looking at the PhysX’s internal scene with bEnablePhysicsOnDedicatedServer left at it’s initial default value (false):
UE: the skeleton stays still
PhysX: the skeleton stays still, but accumulates gravitational velocity (thus, PhysX must be simulating it. it doesn’t move due to UE constantly overwriting the transformations of the skeleton’s PhysX bodies.)
If physics simulation is enabled at a later point (skel->bEnablePhysicsOnDedicatedServer=true; skel->SetSimulatePhysics(true)), then the skeleton will immediately start falling at a high speed, due to the accumulated velocity.
(I did not take a look whether the accumulated velocity is visible also on the UE level; I stumbled on this by accident while tracking a different issue in PVD.)
@oricohen: You seem to be working on this topic and might want to take a look at this?