1/8” is absolutely a significant change. Especially if you are riding long distances or otherwise pushing your limits, including experiencing knee pain.

My suggestion is to ignore all the formulas once you get your saddle into the correct ballpark. Go for a ride with your allen keys handy and play with minor adjustments of saddle height as you ride. You should probably mark the starting point so you can get it back if you make an adjustment that doesn’t work out.

Something else to consider is that saddle height isn’t the only thing that can cause knee pain.