Picking Performance

That depends on how efficient the picking algorithm is, and how much time you can allot to it. It's not an unreasonable thing to do.

Sorry, I should have been more specific. This is by rendering in selection mode, using a gluPickMatrix. Just to clarify.

In that case the performance will depend on how many vertices your card will have to transform and how many fragments it will have to rasterize since you effectively have to render your scene twice. As long as you do the obvious stuff like frustum culling, turn off textures, lighting and other unneeded states, and use a lower LOD mesh, you should be just fine with this method.

Also, consider only re-picking every 2-4 frames. The latency will generally be unnoticeable.