Not trying to confuse you more, but if you have knee problems you might want to consider Speedplay pedals. The cleats have a lot of float which means your knees are not as locked into one position while you pedal. I find that you do want to use the cleat covers if you're walking on anything unpaved to keep dirt out of the cleats.

I used SPD pedals on my road bike for several years and they were fine until I started having knee problems, which is when I switched to the Speedplays.

For shoes, Sidis are excellent but expensive and on the narrow side. I have new Bontrager shoes which I think I will like a lot once I get the cleat position adjusted correctly. They have good arch support and are not as narrow in the toe box. And they have carbon soles but only cost $180.

I haven't had trouble walking around in road shoes with cleats, as long as I wear the cleat covers. I can walk well enough on pavement without the covers but that does nick up the cleats quite a bit.