In Occupational Therapy, you have neuromuscular components of activities and motor components of activities, including such things as range of motion, muscle tone, strength, endurance, postural control, gross and fine motor co-ordination, crossing the midline, bilateral integration, praxis, and visual motor education) – according to how I learned 10+ years ago. I know that terminology is dynamic and has no doubt changed in concept since I studied.
In order to be able to sit and knit, you need a good posture. You need to have enough core strength to be able to stabilize your trunk, shoulders and elbows, with your wrists and fingers doing most of the movement. Of course this is not 100% necessary, as you can adapt the position of the knitter depending on their physical strength, but ideally, you want to be making small movements with the hands. (adapting the position or technique is something that is relevant to people with special needs who are interested in knitting.)
Small, isolated movements with the hands are possible when the trunk and larger joints (shoulders and elbows) are stabilized either by core muscle strength or positioning with support pillows/wedges. Ideally, the pelvic is neutral, and the spine is straight/neutral and the shoulders relaxed.
Fingers and hands can get fatigued with all the work, and for this reason, it is helpful to know a variety of ways to hold the yarn while knitting. Repetitive motions can cause strain over time.
The hands work together, using reciprocal movements. Instead of the non dominant hand needing to secure the page so that it doesn’t move when the dominant hand is writing, for example (asymmetrical movements), or both hands doing the same movement simultaneously as in rolling out dough with a rolling-pin (symmetrical movements). This is a wonderful activity for bilateral integration, with the hands using reciprocal movements. Fine motor co-ordination is integral. As is motor planning (praxis), certainly in the initial learning stages.
In the initial learning stages, visual motor integration is required as you follow the movements and interpret the positions of the yarn, needles and fingers and plan the movements based on the visual information coming in. Once your hands know what to do, the visual perceptual components are confined to being able to recognize or identify a mistake. (Patterns of stitches, orientation of stitches requires visual attention to discern mistakes/irregularities).
In short, knitting requires and challenges a variety of physical components together with cognitive and psychological components. The integration of physical and cognitive and psychological components in the working with hands is what makes it so important, in my opinion. The creation of beautiful garments, toys, useful objects is less the goal when working with children. Their experience of challenging themselves and mastering a new skill is where the focus is.