How do you pick up things and move them around? Like in Fallout where you could pick up limbs and such. I am using the Playstation 3.

Also, removal of limbs doesn't happen when I hit a dead body with a sword?

It's holding the 'activate' button on Xbox. So I'm guessing it's holding X on the PS3.

No, you can't lop body bits off, there's no local damage thingies (I'm uber technical)