yeah it is ridiculous - makes playing in 3rd person unplayable and laughable. But I think it is engine limitation, until they ditch gamebryo, this is what we will see.
It's not an engine limitation.
http://en.wikipedia.org/wiki/Gamebryo
[media]http://www.youtube.com/watch?v=xYQp1semBJ4&feature=player_embedded[/media]
Looking at the video, I can see characters moving normally.