Sorry that this response is so late, but I do have a bit of suggestion.
My first suggestion is to use the libgdx Box2D Physics engine. It is a java binding of a native library, which in practical terms, means it works really fast. Box2D also has more features than Phys2d in my experiance with one exception: Box2d does not have direct support for concave polygons. This can be overcome by adding several shapes to a single body. Box2D is also kinda non-user-friendly (what with needing to make a body def to make a body and a shape def to make a shape and all...), but it is the most certain method I have for speeding up physics. I have personally used this engine to simulate a few hundred bodies (with maybe ten dynamic ones) at a time.
However, if you need to use Phys2D, I'm afraid I don't have enough experience with the engine to help you optomize.
_________________ "Artificial intelligence will never be a match for human stupidity" - "Jamos Kennedynos"
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