To dampen the velocity of an object that has forces applied, I think you could just multiply the velocity by something like 0.95 (or a value near 1) every 0.01 seconds or something like that..
To help prevent objects sticking into other objects, you could try moving it out at the angle of the collision's normal a distance of the collision's depth(or maybe it's the negative of the depth?).. You'd get these values on post collision and perform the move then.
That is what I would try.
edit: btw, thanks for the info r0j0hound , I kind of thought it might require a lot of editing, but figured I'd mention it anyways in-case you ever see an opportunity to try it.