The physics engine acting on the instance is not working
The sphere can fall freely before adding an instance, but it will remain motionless after adding an instance.
My understanding is that thin instances and the physics system are not designed to be used together. Iām adding @Cedric here just to be sure. But from what I understand from those systems the physics system is not aware of the thin instances buffer system to update them directly.
What you can do is to use a Transform node that will be updated by the physics system and transfer that information manually to the thin instance system (see example bellow):