Ah, to position physics objects you need to disable the physics behavior, move them, and then enable the behavior, and set the velocities to 0.
This doesn't work in your case though, as you want the wheels to move the car body. In that case you'll probably need to create a physics joint/hinge between them but I'm not quite sure how that is done exactly.
Your method would work in reverse for a one-wheeled/physics body object though, where you can position the non-physics object to the physics objects image point and it shouldn't glitch.