Objects fly away when I 'set simulate physics'

Check out the collision section of the documentation. You have to set collisions according to a table so that different actors behave according to your expectations.
Another thing is that when you set simulate physics on the arrow, you must define it´s weight and the weight of the object being hit, assuming the object being hit also simulates physics.

Im trying to make a function where There is a character that would simulate physics when shot with an arrow, but upon contact with the arrow, the object flies away at high velocity, how can i fix this

Thanks.That Solved my problems

No problem ma dude