You can twist virtually with good precision. But, what is much harder is the feel, state of the knob, particularly when it is released and then gripped again.
Mechanically, the structure of the knob can take some energy input, and it serves as a mechanical pivot, or fulcrum, depending on how people use a knob.
Without all those physical things, people lack the complex frames of reference needed for fine, "thought is action" type control.
This is especially true in environments where gloves are worn.
Have you ever used an iPod (capacitive touchpad) scroll wheel?
A good physical knob is still better, but a touch wheel can be made pretty decent.
A bigger thing (for me) is being able to sense gaps/shapes without pressing anything and a fixed layout - touchscreens are about the change but that's only good for UI that you look at.
Something that creates physical feedback is for example that Disney VR project where they use air to create the feeling of resistance