It is a physics engine, but it has the features you would want to simulate tabletop wargaming. So, yes you have to move the pieces with the mouse, track casualties, roll dice, place blast markers, etc. yourself. But you can do so quickly because of the functionality of the program. I am putting up a couple of screenshots.
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I am using the hexgrid instead of freeform because I think it is a little faster. The hexes can be treated as being 2.5cm and they can hold one model. So, for moves and ranges of 15cm or less, you can count out 6 hexes. Larger distances can be measured by just holding the tab key. The first picture shows an early setup, the next time, I figured out how to get things setup much faster.
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I had been considering using zombocom's simulator, but it looked like there were some issues and enthusiasm was waning. I haven't tried zombocom's program, so maybe the people who tried it can give me some feedback about how hard it is make armies and maps and use the software. In Tabletop Simulator, it takes about 1 hour to get the models for an army uploaded, about 45 minutes to construct a large map, and about 45 minutes to assemble armies and do miscellaneous setup. The models and map (or the whole setup) can then be reused. The graphics could actually be much nicer than what is in the screenshot; the screenshot just shows a low quality map I threw together and the default models for units. In any case, I would be interested in an update on zombocom's program and if he plans to continue developing it.