I think this is a topic to discuss with your osteopath or whichever doctor you have that's most familiar with the state of your knees. Remember, too, that you have had other overuse issues--your hamstring and ITBs that might be irritated by running. I hadn't been running very long or all that much when I developed hamstring issues--issues that continue to plague me roughly 8 months later.
I do like the Couch to 5k approach and I don't see anything wrong with stopping short of the final goal of the program if your body (or mind) responds better to shorter intervals. Like Crankin, I find that I have to give my legs a bit of extra rest when I run regularly. If you experience the same thing, I have to wonder whether it will cut into the other workouts you seem to be enjoying at your gym (Bosu and your group ex) and likely getting a lot out of. In terms of addressing your muscle imbalances, I'm not sure running offers much--but that's something I would encourage you to talk to your trainer about.
Live with intention. Walk to the edge. Listen hard. Practice wellness. Play with abandon. Laugh. Choose with no regret. Continue to learn. Appreciate your friends. Do what you love. Live as if this is all there is.
--Mary Anne Radmacher