1/8-inch can make a huge difference. You should think in terms of MMs.

You might want to go get a professional fitting -- it's well worth the money. Not sure what kind of fittings you've been getting. A professional fitter will account for different leg lengths -- one solution is insoles with shims on the bottom of the one worn on the shorter leg.

Also, it's often hard to tell right away if a change you've made is the right change -- it takes the body a while to adapt to a new set-up. My set-up, done by a pro, felt "wrong" at first, but after a while it felt perfect. This really can complicate things. Especially if you're changing more than one thing at a time -- seat height, position (forward-back) and cleat position. That's a lot of variables and possible combinations, as you've discovered.

Of course, you could have a knee problem that's aggravated by the movements inherent to cycling, no matter what your seat height is. Good luck!