No there is way to add physics to skeletal mesh: search for “Ragdoll in unreal” there are plenty of tutorials.
Or get Advanced Locomotion System from marketplace, play with it, see how ragdoll works, and what it really is before you spend month learning it and then developing it for your project.
For static meshes, problem is if you use them is that if you change dimensions or want to slightly move mesh, really anything, it will affect physics. So it is easier to make invisible ball or capsule that simulates physics, then put your visible mesh on top of it. Less hassle if you want alter mesh.
I was doing prototype of 3d space combat with inertia based and physics simulated spaceships, and it was really easier to have every spaceship as ball, and then just swap visuals on top of that invisible ball.
I think your “bug” is because you can only have single mesh that is physics simulated in component hierarchy (unless you use physics constraints or let them move separately).
Ps. pic of components hierarchy with ones using physics could help here.