Making Physics objects in UDK

1. Add a static mesh to level (nb it must have collision either by making a ‘YOURMESHNAME_UCXcollison hull or by using the collision tool thing in the static mesh editor.

2. Select the mesh in the level, and Rclick it, select Convert StaticMeshActor to KActor 

3. if you want the physics to begin straight away, select the mesh in the level, F4 for properties, under KActor tick Wake on Level Start

cribbed from: http://3dtuts.co.cc/2010/07/how-to-create-a-dynamic-physics-object-in-udk/

also see: http://www.chrisalbeluhn.com/UDK_Physics_Asset_Creation_1.html