Yeah, this seems extremely bugged at the moment. The only other work-around I figured out so far has been to enable “Generate Wake Events”, which — despite the name — is required to generate sleep events. Then in onComponentSleep call WakeRigidbody.
In my project this thing is physics constrained to a rigidbody which is a child of a motion controller and should wake up as soon as the controller moves, but it doesn’t, so I feel like this is a Chaos bug (maybe it should be named after Hypnos, rather than Kháos). It even manages to sleep through the sensor noise and subtle hand movements of a human trying to keep their hands still, so it seems way too sensitive.
I saw another thread request information about how to re-enable PhysX in Unreal 5, which would probably best until Chaos is production ready, but unfortunately it didn’t have any replies either.