How did I mess up roblox hit boxes? (And how can I fix it?)

What my error looks like: http://imgur.com/a/cF5cw

Important notes:
The bullet destroys itself when it detects the collision
The gray area is the actual part
The character is controlled through CFrame and is anchored.
The projectile uses velocity to move

As you can see, collisions aren't being detected at all, or are being detected before the client ever sees the parts collide. I have tried using custom collision as well as the simple part.Touched:connect(function() end) event, but both either go off too early or not at all. What did I mess up?

-The Code

function fire(direction)
    local projectile = Instance.new("Part", workspace)
    projectile.Name = "Projectile"
    projectile.CFrame = CFrame.new(char.Head.Position, char.Head.Position + direction) 
    local spawnPos = projectile.Position
    projectile.Velocity = Vector3.new(direction.X * projectileSPD, 0, direction.Z * projectileSPD)
    projectile.CanCollide = false
    projectile.Size = Vector3.new(.7, 0.2, 3.06)--(.1,.1,.1)--(.7, 0.2, 3.06)
    projectile.Transparency = 0

    local surfacegui = Instance.new("SurfaceGui")
    surfacegui.Face = "Top"
    surfacegui.Parent = projectile

    local image = Instance.new("ImageLabel")
    image.BackgroundTransparency = 1
    image.Image = projectileImage
    image.Position = UDim2.new(0,-100,0,-100)  
    image.Size = UDim2.new(0,1000,0,800)    
    image.Parent = surfacegui   

    local potentialHits = {}
    spawn(function()
        while projectile and wait(0.1) do
            if (projectile.Position - spawnPos).magnitude >= range then 
                projectile:Destroy()
            end
            projectile.Velocity = Vector3.new(direction.X * projectileSPD, 0, direction.Z * projectileSPD)  
        end
    end)

    projectile.Touched:connect(function(otherPart)
        if otherPart.Parent:FindFirstChild("PlayerID") and otherPart.Parent:FindFirstChild("Health") then
            local damage2 = math.max(damage*0.15, damage - (otherPart.Parent.Stats.Defence.Value.X + otherPart.Parent.Stats.Defence.Value.Y)) 
            otherPart.Parent:FindFirstChild("Health").Value = otherPart.Parent:FindFirstChild("Health").Value - damage2
            projectile:Destroy()
        end
        if otherPart.Parent ~= script.Parent and otherPart.Name == "Wall" then
            projectile:Destroy()
        end
    end)
    wait(math.random(cooldown - cooldownrange, cooldown + cooldownrange))
end

-Edit 2 http://imgur.com/a/83oW0 - Most recent code It is now hitting except the hitboxes are still messed up