What is it? I seem to be able to knock it around, but once I stop it quickly gets up again and moves off. Is there anything I can do with it?
It has nothing to do with Steel Soul mode, it's always there. This is just the False Knight's mace. Apparently the False Knight stuck a little bug at the end of a metal rod to fight with, and once the Knight is defeated that bug scurries away.
You can't really do anything with it, it's just there for a bit of humour.