Well, solved, not really, sort of worked around it

The software skinning thing did seem to fix the bounding box issue, but it was so much slower, I'm intriqued by the discussion about the software skinning being optimized. I found what seemed to work, was taking the unwrap3d plugin, exporting out of max, and then reimporting back into max. What this does is take the physique data, and converts it to skin, it seemed a bit more happier with skin data, as apposed to physique data.
I had a couple issues before this with normals, and being inside out, those were addressed using the 'box' trick. If you look closely, there are a few issues(and especially walking around), where you can see issues with the characters. Basically, in these screens some of the characters didn't go through the export/re-import (trick). I think since I heard that physique was sorta on the way out, that I will advise to use skin instead, as it's more common amongst other software, like perhaps maya,lightwave,so on.
In the future, I might take our engine's exporter, and spit out Horde format, as it's pretty solid, however, I like Collada, as it's common across many other software packages. I think it's nice to have one format that you base conversions from, however, we are sort of at Collada's mercy if you will, and I don't really like that much either. I see myself, getting into Blender at some point, as I believe it can do all that's needed to make quality models for real-time games, as I have 0, I mean 0 interest in pre-rendered material anyways. Besides I'm a bit peeved that all competing products end up as Autodesk whatever, is Lightwave next?