I heard back from Sharon about what she means by “pick up”, and no, she does not use the term interchangeably with “knit up”, as some do. (And just to be clear, I was not saying she did; I was wondering if she might, and wanted to know.) "Pick up", for her (and me, and lots of other people), means to put a strand of the fabric on the needle. (I’d like to see, up close, how she does that with yarn this fine. How does she know which piece of a stitch to hang on the needle?)
Having given it some thought, I don't know it matters whether you knit up the stitches or pick them up. I think the important thing is making sure that the row count is correct.
So the instructions are to pick up 865 stitches, then knit 4 rows, then the break row, then 4 rows. That means there are 9 rows of stitches hanging off the needle (4 + 1 + 4). Since I knitted up the stitches, I worked only 3 rows before the break row, and have the same row count. (1 + 3+ 1 + 4)
You won’t believe how long it takes to knit across 865 stitches.
And Aarlene, it's really isn't that bad. Once you get your head around having that many stitches on the needle, it just sort of becomes normal. I think the largest number of stitches I've handled was around 1300, though, so maybe I'm partly innoculated or something. That said, Margaret Stove once told me she was working on a shawl that had 1857 stitches in the row, and I had to read that number about 4 times, just to make sure I really understood what she had written.