COVID-19 pathogenesis poses paradoxes difficult to explain with traditional physiology. For instance, since type II pneumocytes are considered the primary cellular target of SARS-CoV-2; as these produce pulmonary surfactant (PS), the possibility that insufficient PS plays a role in COVID-19 pathogenesis has been raised. However, the opposite of predicted high alveolar surface tension is found in many early COVID-19 patients: paradoxically normal lung volumes and high compliance occur, with profound hypoxemia. That 'COVID anomaly' was quickly rationalised by invoking traditional vascular mechanisms-mainly because of surprisingly preserved alveolar surface in early hypoxemic cases. However, that quick rejection of alveolar damage only occurred because the actual mechanism of gas exchange has long been presumed to be non-problematic, due to diffusion through the alveolar surface. On the contrary, we provide physical chemical evidence that gas exchange occurs by an process of expansion and contraction of the three-dimensional structures of PS and its associated proteins. This view explains anomalous observations from the level of cryo-TEM to whole individuals. It encompasses results from premature infants to the deepest diving seals. Once understood, the COVID anomaly dissolves and is straightforwardly explained as covert viral damage to the 3D structure of PS, with direct treatment implications. As a natural experiment, the SARS-CoV-2 virus itself has helped us to simplify and clarify not only the nature of dyspnea and its relationship to pulmonary compliance, but also the fine detail of the PS including such features as water channels which had heretofore been entirely unexpected. For a long time, physical, colloid and surface chemistry have not intersected with physiology and cell biology as much as we might have hoped. The reasons are starting to become clear. The discipline of physical chemistry suffered from serious unrecognised omissions that rendered it ineffective. These foundational defects included omission of specific ion molecular forces and hydration effects. The discipline lacked a predictive theory of self-assembly of lipids and proteins. Worse, theory omitted any role for dissolved gases, O2, N2, CO2, and their existence as stable nanobubbles above physiological salt concentration. Recent developments have gone some way to explaining the foam-like lung surfactant structures and function. It delivers O2/N2 as nanobubbles, and efflux of CO2, and H2O nanobubbles at the alveolar surface. Knowledge of pulmonary surfactant structure allows an explanation of the mechanism of corona virus entry, and differences in infectivity of different variants. CO2 nanobubbles, resulting from metabolism passing through the molecular frit provided by the glycocalyx of venous tissue, forms the previously unexplained foam which is the endothelial surface layer. CO2 nanobubbles turn out to be lethal to viruses, providing a plausible explanation for the origin of 'Long COVID'. Circulating nanobubbles, stable above physiological 0.17 M salt drive various enzyme-like activities and chemical reactions. Awareness of the microstructure of Pulmonary Surfactant and that nanobubbles of (O2/N2) and CO2 are integral to respiratory and circulatory physiology provides new insights to the COVID-19 and other pathogen activity.