What that salesperson meant when he said having the seat too low is bad for your knees is that you will have knee pain. Usually If a seat is too low you'll have pain in the front of your knee and if its too high you'll have pain in the back of your knees. If you want to have your feet on the ground maybe look at something like a Trek Navigator or Specialized Expedition which will have gears though. I think you should take a look at a Trek Earl also its a single speed a little under 500 and doesn't look too fancy so you won't have to worry as much. Either way one thing I always say is use a HEAVY DUTY lock like a Kryptonite New York chain and have all the quick release parts locked down. Also get a seat lock which is a bike chain thrown into a tube and fastens the seat tro the frame. It isn't such a common thing and you'll have to find a shop that does it as many have never even heard of a seat lock before. This video should give you a better idea of how to lock a bike in NYC.

http://www.youtube.com/watch?v=ryY-qMFLcfo