If you require code that will run on Xbox 360 or Zune then you need a 100% managed engine.
Most of these are free, or are free wrappers around commercial products. You should look at each one and determine pricing and licensing.
If you are only targetting windows then you can use any of the commercial, or open source engines. Some have managed wrappers or you may need to roll your own
- PhysX
- ODE (Open Dyamics Engine)
- XPA (XNA Physics lib): XnaDevRu has a nice wrapper for, but it's majorly outdated and ODE is rumored to be bad/unstable. There's very little information about it, but the API is pretty friendly. Pretty easy to get up and running with simple collisions (even I made it!), but its hard to find what you need when problems occur, and its updated very slowly.
- Newton Game Dynamics
- Newton physics: Was written in 8-10 hours so I guess its quality reflects that.
Other Lists
XNAWiki Physics Engine list
Ziggyware Physics links
The ZBuffer News and information for XNA
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