Lots of people trade physically settled commodities futures contracts without handling the underlying products. You just have to make sure you close or roll your position before it settles.
That's not correct. They still have to pick a settlement price. Physically settled futures makes sense when customers are interested in the commodity itself and cash settled makes more sense for pure speculation.
Sure. But physically settled funancial futures such as bond futures are physical because customers actually want to get delivery of the underlying bonds. In the case of bitcoin futures, most likely they don't. Physically settled futures cost the exchange more in terms of additional expenses / infrastructure. So the exchange will go with physical only when there is a clear customer demand for that.
You're going off track. I'm just saying that phys settled allows the future to track the underlying better because you can take delivery. This is a completely seperate issue on if you actually want to hold the underlying (many people would prob love the idea of using cme to deal in btc directly since current exchanges are so terrible at it).