We present Ball-AR, an augmented reality (AR) game where two players in the same physical space attempt to hit each other with virtual dodgeballs overlaid on the physical world. Researchers have studied AR's potential for fostering co-located interaction and physical activity; however, they have not investigated the impacts of physical activity and physical environment on user experiences and interaction. We created an AR dodgeball game centered around encouraging physical activity and harnessing the physical environment. We then evaluated the game with five dyads to analyze the impacts of these design choices on the quality of gameplay and interaction between players. We found that physical activity and the shared physical space created memorable experiences and interactions among participants, although participants desired a more augmented and immersive experience.