So I've been playing the campaign, holding out in my ultimate fortress letting the AI build up their bases so the game actually poses me a challenge. Anyway, it seems that once the AI has a massively built up base, several problems start occurring:
1. I immediately notice that I can't pick up any objects.
2. Enemies can not be damaged. Bullets pass through them. I have to crush them into dirt or other surfaces with a rocket or something.
3. Sometimes the issue resolves gradually; first I can damage enemies, and after a few kills I can pick up weapons. However, most of the time, the issue does not resolve at all, breaking the game.
Is this a common issue? I've tried searching to no avail. Is there any kind of solution, or is the game just fubar at this point?

EDIT: So apparently explosive weapons still work quite well at dispatching enemies, thus getting rid of excess MOIDs. Will further test this hypothesis.

This is due to an oversight when the engine was first started. The engine will only allow 255 MOIDs, each limb is a MOID and so is each gun, after it goes past this limit physics starts going wonky. This wasn't an issue until the auto build bases were added since they have so many actors that this limit is reached before you start landing troops. The issue being slowly resolved is because as the enemies die they free up more of the limit for other actors. It is a common issue but probably won't be fixed until Cortex Command 2 if there is one.

It's always been an issue, how do you think crab bombs worked?
In general you'll want to keep an eye on the MOID count, press CTRL+P to show it (and some other information). If you need to lower it and don't mind losing a few troops you can copy+paste the following into the console: