Keep slowly raising the seat 1/2" or so every week until your leg goes *almost* straight when your pedal is at the low point in its circle. As you raise your seat you will notice less knee pain.

You're not supposed to be able to put both feet on the ground and still be sitting in your saddle. Even one foot should be tricky unless you have the bike tilted. You're supposed to move forward and off your seat with one foot on a pedal and the other foot coming down on the ground. When you are stopped, you should have one foot on the ground, the other on one pedal, and your crotch over the top tube, not on the saddle.
Practice will make it easier and easier. And the knee pain will be your motivation to get your saddle up where it belongs.

Don't give up!