When you parent an object to another you implicitly declare the child to be a static object regardless if you set the physics type to dynamic.
If you look at the behavior you say: "I do not want this object to be controlled by the physics. I want it to follow the parent."
Therefore the physics will ignore this object.
From you question I guess you assume that the parent object considers the child. But why should it? If you want to "extend" the object you need to enable
Physics/Collision Bounds/Compound on both the parent and the child.
If you need the parenting in-game see EjayACER's response. It describes how to do that with the parent actuator.