Yep your right, there is a huge invisable box around your level. This is the way that DBP nativly handles collision...you could set the collision on the level to polygons as this means the collision would behave as you want it to (colliding with walls and such) however this is very slow.
The main way people have been dealing with this is by using plugins to handle their collision:
Newton: An amazing plugin which handles not only the collision but fantastic physics...its a lot of stuff to learn but it seems to be worth it for alot of users (I havnt used it yet, i didnt fancy all the new learning as i didnt need physics
that advanced!)
Nuclear Glory: A very popular plugin which specialised in collision between complex objects at great speed, accurate and fast...the only downside is if i remember rightly you have to buy it/
Sparky's Collision Dll: Now this is just a replacment of the DBP intersect object command...but a very powerful one (I am a little biased as i use it for all my collision codes) it allows you cast a ray from one point to another and check if an object is in the way.
The use of this ? imagine you cast a ray down from your charcter, you can find the distance to the floor and thus if he is standing on it...you can cast one infront when you walk to see if there is an object in the way...basically you write the collision routine yourself, what i also like about it is that there are only a few commands to learn.
for further reading have a look here, this is a list of popular plugins for DBP
http://forum.thegamecreators.com/?m=forum_view&t=39033&b=5
Good luck!