Based on the description,Catapult can only effect items that are not being held, and not being worn.  Could I, in essence, toss an item (say a dagger) in the air, and then cast catapult on it?

I suppose you could, but wouldn't a 1 pound rock work just as well, and costs less.

You could, but it’d take a generous DM to give the dagger’s 1d4 damge (even more generous to add your ability mod to damage) on top of the 3d8 the spell already does. I think I’ve seen this done before and saw that the DM had them roll to find out if it struck in such a way to bury the point of the dagger and do the d4 damage. That seems reasonable enough to me.

Tossing the dagger might be considered an action whereas dropping it would be free. So you could drop the dagger and cast the spell, but like Jacqsynn said, a rock would be cheaper.

Quote from BadKharma >>

Based on the description,Catapult can only effect items that are not being held, and not being worn.  Could I, in essence, toss an item (say a dagger) in the air, and then cast catapult on it?

  As long as the item was already in your hand, you can drop (toss) it for free. Pulling an item out of your bag and dropping it may be considered an action by your DM.

 You didn't ask about damage, but just in case: The item would only do the damage of the spell unless the item had an effect when struck or broken (as the item does take damage too as per the spell), or your DM rules differently.

Maybe consider using flasks of oil instead?

Perfect.  Thank you guys for the timely responses!