When you pick something in AutoCAD editor, AutoCAD provides you a PICK BOX, anything crossed by the pick box could be selected, and the PickedPoint property is the center of the pick box. So, as you already know, when the pick box picks an entity with its box edge, the box' center may not exactly on the picked entity. So, the PickedPoint property is just a reference of where exactly the pick box center is when user clicks. If you need a point that is exactly ON the picked entity, it is your responsibility found out where that point is.
Fortunately it is quite easy to do in most cases (when the picked entity is an entity derived from Curve: you can use Curve.GetClosestPoint([PickedPoint], false) to get it.