most articles about replaying movement on prediction error can just rewind that one object and step it through time
With ODE, you can do that too. Note that collision and simulation are entirely separate concepts. You can create a separate body for an actor, and a separate dWorld to keep that body in, and just simulate that body. You can collide that body's colliders against your static world collision space and generate contact joints only in that "single-body" world.
The main question is: what parameters do you use to create that body? You need a log of the last X ticks for each entity that may rewind.
And, if you have that log, you could just as well use the regular world, forcing all entities except the rewound one to take on their state as of the given time step being re-simulated.
I'm not really sure what you mean by cascading correction.
If I rewind the world, and change whether your character hit a wall or not, then that wall may collapse where it previously didn't, and the player standing on top of that wall will fall down versus not, and the sniper shot she was taking will hit or miss, which affects another character ...
You can think of causality as a graph, and each time two different actors that are non-computer-controlled interact, that's nodes in the graph. Some simulations don't actually change the connectivity between the nodes (or the existence of nodes), whereas others do.
If all you do is re-simulate the one player with the rest of the world locked, then you don't have that problem. You will instead have problems of time travel: If the portcullis was open when I first passed through it, but I then get re-simulated when the portcullis has closed, I will suddenly not have moved through it and instead gotten blocked. As a player, I may disagree with this chain of events. But then, hopefully corrections are rare, and statistically speaking happens during less important sequences (because those are the most frequent -- just running across open ground or standing still.)
Maybe the answer is so obvious that no one ever talks about it and I'm just so dumb.
The reason nobody talks about it is that there's maybe a few hundred people total in the world, out of seven billion, who have done it successfully over a network. It's a small clique, and most of us have real jobs and don't particularly need to go to a forum to talk about it :-)