But if the lap angle is flat (lap parallel to ground), the knees get more stress from pedaling forward, no?
Yes and no, since you only apply minimal force at the top of the stroke. But let's clear up this lap angle stuff the easy way. You'll need a stack of books, boxes or stackable cans. Make a pile roughly 13" tall, stand on the floor and put one foot on top of the pile. Since that duplicates the bottom to top pedal positions (13" crank diameter) you'll see the approximate "lap angle" of a correctly adjusted saddle. To get a better measurement sag the lower leg slightly to duplicate the flex in your knees at the bottom of the pedal stroke.
Now you can also lift the upper leg until the thigh is horizontal, and I'll venture that it takes about another 4" or so. Hopefully, this will confirm what the lap angles are, and you can go back to a correct rule of thumb saddle adjustment.
BTW- many new riders with knee pain have it because of poor pedaling technique. They don't time their efforts for maximum advantage and end up doing isometrics against a crank at a poor angle. You get the most power output when the crank is horizontal and you're pushing tangentially to the turning circle. Earlier or later force has a radial component with the percentage of wasted effort at top and bottom where there's no tangential component.
Also many push the pedals in too high a gear. The pedal can only move at a certain speed because of the inertial of the bicycle. Trying to push it faster than it wants to go, just lifts your body. Train yourself to press (not push) the pedal with controlled force, following it as it moves. It's analogous to pushing a child on a swing. You can work very hard and feel the reaction force pushing you backward, or you can use well timed gentle pushes to get the child swinging quickly with very little effort.
To summarize - set your saddle by the book to full leg extension, less a bit of knee flex. Use lower gears, and don't try to over muscle the bike, and you'll be cruising along comfortably in short order.