We study the interaction between two localized waves that propagate in a bulk (two transverse dimensions) Kerr medium, while being incoherently coupled through cross-phase modulation. The different types of stationary solitary wave solutions are found and their stability is discussed. The results of numerical simulations suggest that the solitary waves are unstable. We derive sufficient conditions for when the wave function is bound to collapse or spread out, and we develop a theory to describe the regions of different dynamical behavior. For localized waves with the same center we confirm these sufficient conditions numerically and show that only when the equations and the initial conditions are symmetric are they also close to bring necessary conditions. Using Gaussian initial conditions we predict and confirm numerically the power dependent characteristic initial separations that divide the phase space into collapsing and diffracting solutions, and further divide each of these regions into subregions of coupled (fusion) and uncoupled dynamics. Finally we illustrate how, close to the threshold of collapse, the waves can cross several times before eventually collapsing or diffracting.