Unfortunately, calculation of a large number of collisions for 'realistic' physics would cause a large load on both the LL server and your Internet connection.
I'll tell you how it works approximately. Firstly, all attachments to an avatar are 'phantom'. You can make a huge sixty-four meter 'physical' cube, but when you put it on yourself, it will cease to collide with the environment. Therefore, for example, your mesh body will stick out through clothes not made for it. Or conversely, someone's genitals can penetrate into it (I'm sorry for this a naturalistic detail ) Second, SL physics doesn't consider an avatar as a complex structure, but as a some simple cube. You can see this if you make maximum shape size and put on some kind of avatar that deforms your skeleton. After, try to walk under a low placed object. You will see that SL 'thinks' you are much larger than you see it. Thirdly, all animations it's don't animations your avatar itself, but it's animation for a some point, originally located in the center of your avatar. It moves along the path given by animation and the 'phantom' of your avatar move with it. You can make an animation during which your avatar will “walk” all 255 meters of the sim, but at the same time it will remain in place. If your avatar will be on a sky platform, you will see that it is 'walking through the air'. But if you really move the avatar beyond the platform, then the collision 'fall' will work and you will fall. Exactly this position of this 'point' that writen in the script that affects whether you fall through the chair or conversely you will 'levitate' over it. And that’s exactly what allows you to quickly change the altitude over (or under) ground of your avatar without changing your shape. I think that creators can write a script that will calculate size of your avatar, but only size of your 'default' avatar without attachments will be taken into account and if you will want to dance on the bar counter, then your shoes all the same fall through it