Use Box Generator, on the Utilities panel, when using Physique with 3DS MAX bones. Physique uses the boxes to determine the radial scale for its default envelopes.
Open the Utility panel and select Box Generator.
Set the name of the boxes in the Box Name field.
Set the Width parameters of your boxes so they roughly fit your mesh.
You can either base the box width on a percentage of the link length, or use an absolute value where all the boxes will have the same width.
With your box parameters specified, click Pick Root Bone.
Click the root bone of your hierarchy either by selecting it in the viewport, or selecting it from the 3DS MAX Select By Name dialog.
After this utility generates the boxes for you, non-uniformly scale the box width and length to snuggly fit your mesh. You can also adjust the object parameters on the Modify panel to fit the boxes in the mesh.
When attaching your Physique mesh to your bones, choose the Object bounding box option for generating default cross sections, and your Physique mesh should deform fairly well by default.
To disable the Non-Uniform Scale warning
When you use Non-Uniform Scale to scale an object in 3D Studio MAX, a warning appears that the scale information is not contained in the Modifier stack. This warning does not apply to biped objects, and can be disabled, as follows:
Choose Customize > Preferences.
On the General panel, in the UI Display area, clear the Display NU Scale Warning check box.
This setting is saved in the 3dsmax.ini file.
Box Name: Type a name to append to the created boxes.
Link Length: Size the width of the created boxes on a percentage of the link length.
Absolute: Size the width of the created boxes on an absolute value.