As per fit, I am all legs and no torso, there isn't a bike out there made even remotely close to fitting me, after talking to 4-5 different LBS's and getting measured. Based on my legs I should be riding a 63 and based on my torso I should be riding a 56. So basically every shop agreed that I have to first and foremost get a top tube to fit, the make up the leg height with the seat post.
I did a fitting on this bike with the help of some online tutorials and basically used the method you suggested, the saddle position is how it is to get my kneecap above the centerline of the pedal, having a short torso and long upper leg means my knee will be sitting very forward so I have to get as far back as I can with the seat. I did use a plumb bob in setting up my knee location, it's been challenging to find a bike to fit, unfortunately even with the saddle all the way back my knee is just slightly forward of where it should be, but it's passible.
I agree 100% I do need to look into a longer stem and most likely one with a more upright angle on the stem, working towards that but haven't gotten there yet. I did see what adjustment could be made with what was there and it was minimal, it's all a 1 piece quill with just a wedge on the bottom and a clamp on the top, to get it off I have to pull a brake level and unwrap the handlebar then slide it around and off, there is not any other way to get it off so I just have not gotten into to that yet. I have to look at my options for putting something else in there.
So yeah, you are right the bike isn't a great fit, but short of a custom frame nothing will be. I did check the top tube length before even considering riding this bike and it's the right length for me so I went with it. Sadly every bike I have looked at new or used I run into the same problems and it's become a very frustrating problem to me, but I am doing my best to sort it out and trying to keep a smile on while I do it. :-)