SOLVED:
Here is what I learned.
So, the solution was actually very simple and intuitive,
Don't bother with setting up props in Blender, all this can be done in PixelOver itself and its a lot easier than blender.
1. After setting up your rig, I use mixamo animations for the character, select your 3d character and make sure Edit Bones is enabled.
2. You should see your bones listed out in the hierarchy like in the screenshot above
3. Open up your prop in pixel over and copy and paste that 3D model into your pixelover project with the rigged character.
4. All you then need to do is change the transform for your prop so it lines up how you want for at least one frame in any animation, I used the sword casting mixamo animation and set the sword in the right hand facing the direction of the strike, this takes up the most time and you need to change the scale, position, rotation e.t.c until your satisfied, you can also adjust the bones lets say for the thumb so it grips the sword better but that's optional if you might have low res pixel art that doesn't need that much precision.
5. Then you drag the sword 3D model (the prop) to become a child of the bone you want it to follow, here I dragged it to the right hand mixamo bone, note that by default all objects will follow the parent as children so unlike in blender you don't need to go through extra settings to create a constraint or inverse kinematics (although that's also there in the settings of pixelover) and by default it should just work perfect.
Side Note:
I have two instances of the katana, one in the right hand for when its drawn and another in its case that is a child of the characters spine bone for when its seathed.
I then hide and show the katana for when I want to export it for attacks in the right hand and for when its not being used in its case and export the animations picking each animation accordingly.
If you hide the bones the katana wont show but for placement you can set it outside of the bones if you don't want to see them and then place it back so it follows that bone throughout the animation.
Hope this helps anyone else with this same issue.