AHA! Using DMX exporting and the Weight Cull tool and a combination of manual weight painting solved the problem. To anyone else with the issue: make ABSOLUTELY SURE the weights for a bone are ONLY on one convex object. I must have messed up and selected multiple bones while parenting the object.

Update: When using $collisionmodel, the physics model appears exactly as i exported it. When using $collisionjoints, the phys mesh geometry gets warped on certain bones, causing physics glitches.

Okay, I'm still having issues and when I imported the model into Gmod the model spazzes across the map. Scaling the model up helped with the issues somewhat but there's still problems. Here's my source files, see if you can see what I did wrong: (baleeted cause I solved it)

I can't supply the file atm, but I can tell you a few things:

One, I used $collisionjoints, which according to the valve wiki is what you use for ragdolls.

Second, after subdividing all faces and vertex smoothing the result, I got less errors and the geometry improved slightly. Am I on the right track to fixing the issue?

Thanks for that, we've cleared Blender, but the physics model looks like this: http://i.imgur.com/Mt1RCsY.png

And I'm getting the two-dimensional geometry error. I've read that you have to smooth the geometry somehow but I couldn't figure out how. any ideas?

I had a phys mesh that wasn't working right, so i rebuilt it. However, now I get this error:

http://i.imgur.com/fJvc5yh.png

I saw a thread on this error before, but i don't have any vertex animations, which was the problem on that thread.

If more info is needed i'd be happy to oblige.