Objects going inside eachother before correctly colliding,Objects go inside eachother before correcting their collisions

I’m having a problem where an object will correctly collide with the ground but not before going inside of it for a few frames. The falling object has no script, it’s only falling using Unity’s built in Physics engine, it has a BoxCollider2D and a Rigidbody2D where Collision Detecton is set to continuous, Sleeping mode is set to Never Sleep and Interpolate is set to Interpolate. The ground is simply a big object with only a BoxCollider2D. Here’s an example of the problem (Frame by frame):
[201212-untitled.png |201212]

I have treid to tinker with the Rigidbody2D options and even raised the Physics2D Position Iterations, both to no avail, lowering the Gravity from -40 to -10 seems to help, but then the game feels too floaty.

I found the problem, even though I don’t really understand it. My Default Contact Offset was set to 0.001 instead of 0.01, and, for some reason, that broke the Continuous collision detection of the rigidbodies.