There are two distinct possibilities that cause this.
1
Generally, one purchases a mountain bike that is at least one size too small.
Of course, we want to avoid the top tube, but. . .
This makes the handlebars quite a bit lower than anybody ever intended.
And, you smash your goodies.
There are stem risers (for threadless/Aheadset), there are $7 Wald "North Road" 3-speedy, 23" wide handlebars (looks okay with huge MTB/BMX grips), and there are large high-rise MTB "Mary" bars that can all re-size your bike back UP to the correct size for your body so you don't smash your goodies.
In this case, areodynamics aren't a concern unless your back is in a "C" shape, and, really, you are only taking steps to make the bike the correct size anyway.
2
The other way to smash your goodies is having too tall a standover height for city riding. If you're saving your knees by remaining seated at the stoplight, you might need smaller tires or to slide the seat all the way back, and then lower the seat post 1/2 inch or so. If after that, you're still aching, then you'll need longer cranks so you can lower the seatpost even more. Bear in mid that cranks are measured in millimeters, and that the difference between 170 (standard) and 180 (huge) is enough to ruin your knees, but only lowers the seat by 1/2 inch. A new saddle, such as the Cloud 9 by Velo, could also help, if the saddle doesn't have a very high horn (top of saddle should be flat) or long horn (most ladies models have a short horn) on it. Changing to a frame that has the seat tube pitched farther back is an expensive way to fix this problem. A Kalloy Uno seat post (or similar) can be marginally helpful because it goes back a bit more than average, and putting the seat farther back allows you to lower the seat while still maintaining proper leg extension.
As for me, I put the seat back, but then couldn't reach the handlebars (at all), so I had to fix that first. Later, I found out that my bike was too small. . .and that I had already fixed it.
