Although by design, when a CapsuleGeometry with a zero or near-zero length is used to create a PhysicsShape, a Circle shape type is created instead as a capsule with a small/near-zero length is degenerate and could cause simulation issues. This is part of Box2D however it is causing confusion and can be unexpected so is being removed.
A capsule should always be created however the capsule geometry used will be internally clamped to a minimum value of 0.001 (1 mm).