Algodoo

1(large gear)-this is pretty annoying at times i just use smaller gears though
2(squished objects)-what else is it supposed to do?
3(stretchy hinges)-this can be very easily fixed just set the hinges to a motor with 0 rpm and +inf strength

4(breakable fixates)-this would be pretty cool but can be easily simulated
5(textured backround)-this would lag so much it wouldnt even be funny

A textured background is possible. Unfortunately, if you uploaded a scene with this background, no-one else would be able to see it, because it is computer specific.

1(large gear) it is easier to use gearsets
2(squished) it would be unrealistic for something to simly squish in too
3(hinges) i do hate this as well, but it can be avoided as mentioned and just tuning your setup

4(fixates) just use breakable hinges
5(background) A) it would lag B) it would have to tile unrealistically anyways

1) i hate this too
2) it is normal... try to use celers' ShakeBug killer :
phunlet
demo show
3) use what jakedmoon said it works perfectly
4) good, but use breakabl hings or a square inside 4 other boxes
5) good idea, @TC42, you really don't knw that phun is saving pictures int .phz???

1) Just add a texture to it. Problem solved!
I meant that you can replace the cloud-background by *hacking* phun and replacing the cloud pictures with other images. I also have a tutorial on the forums.

3) No, you guys are wrong. Number 3 is fixed by making the objects that the hinges are attached to more heavy.

1) Just make it a little invisible.