Hi,
Hm, that seems strange. I haven't tried Godot 4 yet, but after checking documentation it seems that CharacterBody3D should interact with rigid bodies (based on description), but from your description they behave same as Godot 3 kinematic bodies.
In Godot 3 I had exactly the same behavior you mentioned and I had to change infinite_inertia
to false
and then check collisions myself and apply force to rigid bodies.
In Godot 4 CharacterBody3D it seems move_and_slide
doesn't have any parameters, so I guess this should be working out of the box, but maybe that is not finished yet? Or some change introduced such bug? No idea.