frankthedm said:This question has a lot of importance.
Those who say you should be able to pick up objects in your reach should consider the scenario of a ogre who decides to pick up a helpless ally of yours in its reach, a Move Action according to them, and then drop the poor character behind enemy lines.
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With 3 potential AoO.
The rules allow you to pick up an object and in doing so generate an AoO.
The rules do not address where said object must be though - so the use of "reach" by default has to come into play.
Remember that a character is somewhere in the square he occupies - not necessarily in the center of it.
So 2 medium creatures can threaten each other when diagonally.
One can hit the other with his fist (which may or may not gnerate an AoO depending on feats/equipment). But if the attacker is in the back of his square and the foe he is attacking is the back of his then there is roughly 7 ft of distance being covered here.
Remember that the combat rules for D&D are very, very abstract. When trying to apply too much "logic" and detail you will only end up putting yourself into a never ending cycle of "what ifs?"