I'm going through the same exact problem as the OP. I recently (2 weeks ago) switched to SPD's from clips/straps (Shimano m540's and m086 shoes) and I'm experiencing pain on the outer side edge of the knee and its REALLY difficult to bend the knee. Walking down stairs is a big pain. Riding my fixed gear hurts more than riding the roadie, because I can't let me knee rest.
I'm currently in the process of trying to perfectly align the cleat onto the shoes. Being a poor college student, I don't really have 50 bucks to go and blow to have a bike shop to align it for me, so I'm doing it the trial and error way. After 2 weeks of riding with the spd's, there is less pain than before, but the injury gets agitated once again when I ride with no hands. Something about my back being completely vertical places my leg in a awkward angle and makes the knee hurt when bending
I wish I had gone with speeplays
. I really feel that the SPD's don't offer enough float for me. Anyone have advice?