Jeff,
I don't see how your temperature problem could have anything to do with the knocking problem, but then, there's lots of stuff I don't see. So, who knows. Re temperature: the first thing I would suspect is the thermostat. Is it in correctly? Like, not upside down. Seal on it properly fitted? Heat it up in a pot with water and with a thermometer determine if it opens up at the temperature it is rated for. Does it have the little jiggly pin that keeps air from getting trapped under it? You should be able to determine if your water pump is doing its job by running the engine without the thermostat for a while and watching for water flow to the radiator with the cap off. However, if the pump were the problem, you'd most likely hear it screech and/or see it leak. If water flows and thermostat works as it should and you still get that kind of excessive temp gauge movement, I would suspect some sort of blockage in the head, or from the head gasket, that keeps coolant from moving properly. Oh yes, and after the car has run for a while and the temperature gauge is up, but the radiator hose still feels cold, squeeze the hose repeatedly. That may dislodge air trapped around the thermostat. Good luck.
Bob S.