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.