I know that collidemesh doesn't work with the physics dynamics, so I have to ddisable viz.DYNAMICS. I don't know if that helps you or not. Check out these recent threads, which may be of some help they discuss speeding up line intersection and doing collision in version 3.
http://www.worldviz.com/forum/showthread.php?t=729
http://www.worldviz.com/forum/showthread.php?t=725