Nevermind, there is an entirely new issue now.
If the hotspot isn't centered with the sprite, then the collision data for some reason is shifted (even with bounding box). But if the hotspot is centered it makes it impossible to create custom collision.
Look here. The red dots are where the hotspots are. The little boxes are resting on where the actual collision box is. All of these are using "bounding box"
Here is a link to the cap file: http://dl.dropbox.com/u/1727838/physicsBug.cap
Please fix the collision bugs