When booting up the game with a Pico 4 headset, the in-game hands are exactly a fist-length higher than the actual controllers. They also still rotate around the physical controllers rotation point, meaning the hands will move in a ring motion around the controller when rotating it.
I've gone through every possibility to fix it on my own end (including every possible form of position/height calibration, Action Pose editing in SteamVR bindings, running my headset in Oculus emulation mode, and even modifying drivers) and considering this is the only game which suffers this issue (that I've found so far) I figured I'd report it as a game bug.