Consider that the rotated layer is the object to which the rotation is applied. Only its coordinates and angle are modified.
But for any object that belongs to this layer there is no modification of coordinates or angle, it hasn't moved, its support moved.
The solution I came up with is to use another object type that I spawn under the visual elements. This object type (let's call it CM) is my collision mask. This object has the physics behavior.
Also it is spawned in the same layer as the physical object the player controls.
But the twist is to spawn the CM according to the current rotation of the layer.
This calls for a bit of maths trickery and setting of the project.A capx
This is the actual system I'll use for the contest. Please learn from it, don't simply rip it off.
It's highly uncommented though, and still a WIP.