hello, if you want to make isometric tile based game. How would you draw the collision shape? I heard we aren't supposed to scale collision shape so flattening the circle shape is out of the question.

I guess I could use small circle for character, and then for bigger circle I would use polygon. Or maybe make the game in non isometric way and then render it in isometric.

how would you do it?

So there are multiple ways of doing this unfortunately and it's a bit of a rabbit hole, I love isometric gaming though so I can at least point you in the right direction potentially, you brought up tiles specifically. This may come across as an odd suggestion, but I have found working with 2D TileMap grids to be an absolute pain in the arse in terms of actual interaction with them and I would go 3D because the interaction/pathfinding etc. seems to work that much better on Godot 4. I'm sure there will be ways to solve this in 2D but for the life of me it's been far more frustrating with 2D that I don't think it's worth the agony.

With 3D there's no need to do any silly maths regarding the cameras either necessarily, you just set it to the angle you want the isometric view at and then you're done. Want the 2D look? Make use of 3D sprites and the billboard mode, I think actually don't starve uses this exact type of trick there are other games as well but it's called 2.5D. Take advantage of the nice and accurate 3D maths to do stuff rather than deal with the agony of getting 2D to work.

If you are using an isometric grid, you can use astar pathfinding and not use collision. You just mark the grids with objects or characters on them. However if you want to check a clear path for a bulllet or something, then you would need some type of collision object for the ray to intersect. I'm working in 3d, but I keep the collision shape down low and cast a ray low to check for a path for an arrow.