I have this sorted out now. It works differently than other OnHit props I've used.
It is indeed a bash that does damage that triggers the Knock but only if the lock DC of the chest being bashed is less than or equal to the OnHit DC, which is 14 for Foundation. If the hardness is too great, it cannot be damaged (haven't tested it with an additional elemental OnHit but usually elemental damage overrides the hardness). There is an exploit, however. If a chest or door with Lock DC </=14 is bashed and damaged, it will trigger the Knock spell and unlock all locked non-plot objects within range regardless of what their Lock DC is.
The main problem that I see is that most default chests (haven't check door lock DCs) have a DC of at least 18 which would prevent the Knock effect. But I suppose you could just keep bashing until you find an easy one. Seems sort of a wasted property to me since, if you can damage it, you can destroy it and retrieve the contents without triggering the Knock effect.
Apologies if you read this before all testing had been completed. Hope it helps... finally!
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Original response (editted):
There is no OnHit for placeables. wrong! You use bash (or cast a spell to damage them).
But you have it right. Each time you achieve a successful hit on a creature using the Foundation flail, the Knock spell will open all locked doors and chests in the vicinity (if they are not flagged as plot). wrong! The only difference between the versions is the enhancement bonus. The DC is the same for each.
edit: I think it's a bugged property. wrong! Tested vs. several spawns of mixed enemies with 10 locked non-plot chests within the encounter range (Knock is supposed to colossal range) and never got one Knock attempt registered on the log. Made sure Silence was not cast, just in case (some were clerics).doesn't work that way! You may have more luck but the DC is meaningless since Knock provides no save anyway. wrong! The only benefit for the flail other than the OnHit is that it is one of the few melee weapons in the OC that possesses better than +3 enhancement.
(Perhaps one of the community's vets could track down the script to figure out what is happening with the OnHit trigger?) Solved.