Reproduction steps:
1. Open attached project "NestedPhysicsBug" and scene "SampleScene"
2. Enter Play Mode
3. Observe the CapsuleParent & CapsuleChild GameObject in the scene.

Expected result: The CapsuleChild moves/rotates when the "Move" or "Rotate" are checked in the "Physics Animator (Script)".
Actual result: The CapsuleChild only follows the parent.

Reproducible with: All Unity versions (it's been like this for a long time).

Note that I have only addressed this issue in 2D physics. In 3D physics (as I mentioned in the user thread), there's a bug which can be seen when you turn off "Move" in the "CapsuleChild3D" GameObject. The GameObject view doesn't move but the Transform does but the body doesn't. That is incorrect behaviour.

Thread: https://forum.unity.com/threads/case-1320783-nested-rigidbody2d-inconsistencies-between-engines.1072940/#post-6928298