The Bitmap has transparency, and only non-transparent pixels are solid and used for hit detection for the physics engine and gameplay.
I have seen some versions done with convex hulls, but for multiple reasons I am not using convex hulls to build the levels in my game.
How can I implement 2d shadows on a level made out of a Dynamic Bitmap?
The answer jpaver posted is good, but I am sure there are some other ways to do this. Does anyone else have any more information on this question?