Sponk
Pause lua function
One of the first things I need to add to the engine is the ability to pause the game in script. This is already done when you Alt-Tab out of the player on any OS. This is probably a system call or something generic related to the window manager. I'll look first to figure out if the pause on Alt-Tab was written intentionally into the player.
The game only updates when the window is active. That is completely intentional.
You should not stop all script updates. That way you are not able to resume game play! Only make a "pausePhysics" function for Lua to pause all physics updates and do the pausing logic in your game. That way you can show a menu, play animations etc.
If you stop all scripts you will not be able to resume them from a script. You might want to look into MGame.cpp for this. There is most of the update logic.
This functionality is basically implemented now. You can turn off physics simulation by setting a game flag. This might be exposed as a global configuration variable ("g_physics" or something).