Item glow on non-item

[FlawlessHappiness]

That still doesn't prevent the picking up sound and message, though.

I would guess you should use different scripts here...

Cover the item in a script area. Then you when you are close enough, and your crosshair is in the script area, make the script:
SetEntityCustomFocusCrossHair(string& asName, string& asCrossHair);

So the crosshair changes, but instead of picking it up you make it an interactcallback so the item disappears when you interacts with the script area.