Collision detection? Look at it this way. When I hit something when going at 4000 mps, I go SPLAT.
As for the AI, true, your wingmen often crash into the ship you're escorting. But if you aren't able to change the AI code, then it's a small price to pay for Newtonian coolness if your wingmen have to follow waypoints instead of using the "guard" order.
Your wingmen do, however, have some problems with dogfighting, but it isn't that bad. Mostly they tend to blow each other up because I set their formations too tight. But they can kill and be killed pretty well if everyone has guided weapons.
Fixing the AI's newtonian problems is something that I'm working on now, and with enough modding creativity any stupid problem can be overcome.