I think the advice given so far might be missing the real culprit.
What the OP is describing is continuing motion when the object SHOULD be coming to rest.
Mass, Bounce, and Friction are merely material parameters. They define what type of material you are using. And while that obviously affects the object motion during the simulation (falling on concrete gives a different motion than falling on rubber), it shouldn’t have much to do with the problem of objects moving after they should be coming to rest (ie, “worm” motion). You should be able to (and can, BTW) decide you want a metal chain falling on a concrete floor, set the Mass, Bounce, and Friction appropriately, and have the simulation behave.
And yes, the Bullet simulator isn’t physically accurate, but I don’t think we’re talking about physical inaccuracy, but rather an issue with the simulation not behaving correctly. And I don’t think that has anything to do with conversion between physics and keyframes. Or Friction and Gravity settings. Nor do I think you need a Damping Force or Direction Force.
Instead, I think the key issue here is some things that haven’t been mentioned, and those deal with the simulation accuracy. If you go into the Scene settings, under Physics, you’ll see three critical settings that define how accurate the simulation will be. Simulation Accuracy, Geometric Fidelity, and Collision Distance. All three of those have a huge effect on how well the simulation will behave.
Collision Distance is critical because it defines how much distance the simulation should allow between objects. If you start out with two objects spaced 1 inch apart, but set the Collision Distance at 2 inches, the simulation might freak and give some “squirmy” results. You need to make sure your collision distance is small enough. BTW, I think it is in % of a scene size unit.
But more importantly, in this case I think you’ve probably got the default settings for Sim Accuracy and Geometric Fidelity, which are probably the culprit for the “wormy squirmy” motion. Geometric Fidelity defines, I believe, how closely the sim models the object surface relative to its actual surface (eg, does it simulate a torus as a simple cube?). And Simulation Accuracy, which I think might be the real cuprit here, defines just that…how accurate the simulation is, and how much of a trade-off it makes versus speed.
So I would crank up the Simulation Accuracy setting, and maybe also the Geometric Fidelity (not sure if that will matter in your case), and make sure your collision distance is low enough. I usually start with something like 10% for that.
I just did a chain simulation I to show how you can have a nice, smooth, falling chain simulation that “damps” as it should and comes nicely to rest, as long as you use good values for Simulation Accuracy and the others. I’ll post the link here in a bit…