Meshs, Game Objects and Groups are complete different entities.
That means you can’t replace one with another.
Physics and visible faces have a very indirect relationship. You can imagine as the Game Engines has two parallel universes.
The Display universe contains the visible representation of your game. This is what the player sees.
The Physics universe contains the physics representation of your game. It is usually invisible.
The object representations in both universes do not need to match.
BTW. there are more universes e.g. the Logic Universe which contains the game logic behavior (not the physics!). It is invisible too but influences the other universes.
I guess you mean something different. I think you are talking about LOD (Level of detail). There is no build in LOD method in the BGE. I recommend to search for it.
You can have LOD on the Display and/or on the Physics. Even the Logic can have LOD. It is used on large simulations.
LOD is possible with logic bricks. But to make the LOD efficient you will need Python.
You need to be careful not to spend more processing time on LOD than you save with it.