I wanted a physical object held by the player that has specific interactions with other objects. I used a child rigid body of the pickable object that holds the visible part of the knife plus additional logic to have the visible part come back to its origin over time, excluding collisions. That worked, but I found that using collisions at all just made getting the behavior I wanted harder. Instead, I created a top-level child Node3D of the pickable and manually controlled its position each frame with ray casts for collision checks.
Another thing I learned was that you can press f in the scene preview to focus on the selected object. Helps make orbiting better.