I see. I think I misunderstood the question originally. You're trying to pick the object up and drop it somewhere else. That means that during the dragging process you really don't want the object to obey physics at all.
Depending on what effect you're going for, you may need to change the body's mode
property during dragging. MODE_STATIC
would let you move it however you like, or MODE_KINEMATIC
might be a better choice if you want it to still detect collisions as you drag it around.
When moving it, you want to update the position using set_transform()
not position
.