Can you examine the frame or preferably have the it checked out by a good bike shop (with tools to check alignment) before you pay?

I thought it was your back that was hurting from the somewhat low handlebar position. I was assuming you had your saddle height correct. Are your legs fully extended at the bottom of the stroke? If not, can you find a longer post? Yes, you would be better served by a frame one size larger, but in my opinion, if you can get your saddle and handlebars where you want them the bike will fit. I don't claim to know as much about fit as a custom frame builder, but if your body is in the same position on both bikes, esp. saddle height and saddle fore/aft position relative to bottom bracket spindle, they kinda fit the same. The size of the frame might affect the way the bike handles and how he ride feels, but it shouldn't really matter to your knees' health.

My bikes are all a little undersized and the only problem I have is the handlebars tend to be a little low, but I feel I gain some performance in exchange for loss of comfort. I replaced seatposts on the bikes that didn't come with 350mm. I understand why you wouldn't want to run a 400mm seatpost and I see your stem is already fully raised, so handlebar position could become a concern as well.

If the saddles are the same height, the knee pain might have to do with how you ride this bike compared how you ride the MTB. Faster, in other words, bigger gears? Removing the computer might help. You could use a heart rate monitor instead, more useful than a computer if you are riding to improve fitness.

Looks like you have a couple of other bikes to ride anyway while you look for a new hybrid frame. Happy hunting!