I think that the answer for all of these physics questions are all answered by getting a new physics engine.
Hardly. Even if there were a perfect physics engine out there (most of the ones I've seen are too slow, buggy, unstable and/or not GPL compatible), you don't just "get" it. It would have to be integrated into the quake2 BSP system (or convert the level to polygons and do a mesh collision, which would be horribly slow and inefficient). Then the whole networking protocol would have to be revamped to account for all the dynamic objects, and would also use a lot more bandwidth. The server framerate would probably have to be increased in order to have more accurate physics simulations, which means more bandwidth yet again, more CPU used, etc. And things like breaking bottles, dinted cans, etc, would all have to be modeled in different states and need a bunch of different sound effects recorded for different impacts and states.
If I add something like moving props or ragdolls, they're going to be hacked into the existing collision system with as few changes as possible. I'm not going to create a full blown physics simulation system or attempt to implement an existing one just so you can shoot cans around.