Funny discussion. Yes, having the the animals/NPC not walk through stationery objects is needed. I built a farm, and spawned my animals in their pens. It looked pretty great for about a day and night cycle, then my animals just walked off—except for one goat who seems to like her pen. The rest do hang around nearby, just not where I wanted them. I love that they lay down and go to sleep at night—though with their eyes open, which is a bit creepy. It's quite comical to see your snoring pig's head sticking through the wall of your house.
I think babies, or multiplying domestic animals would be cool—but if that couldn't happen, then being able to get milk from the cows and goats and eggs from the chickens would be awesome. One other thing re: the animals. We need a staff/stick or something we could use to prod or herd animals we can catch into the pens we build rather than to "cheat" and spawn them via the console.