I just realized that if you make a 2x2 billboard with a mesh the collision polygon essentially becomes a single line, which is not real useful.
So if you want collisions for that object you have to use a dummy, also not great.
The question now is, can we have a setting to not use the mesh altered collision polygon?
I don't see an issue with this, unless there are plans to have actual 3d collisions.¯\_(ツ)_/¯
Edit:
Also the same thing happens to non Sprite objects. The bounding box becomes... well a collision polygon, but one that's a line for billboards.
Edit 2:
Another thing to mention is that this also applies to Shadow Caster.
I can think of a lot of scenarios where you would want the collision polygon rather than the altered mesh for a shadow.