The knee itself has a small degree of rotational capabilities, but it is of my understanding that rotating at the knees during a loaded squat would cause unnecessary stress on the ligaments of the knee. 

I understand the benefit of the hip extensors being more “wound up” squatting with the toes more foward and knees out, but I can’t wrap my head around how this could be good for the knee joint itself.

Nobody can seem to answer this specifically and it’s a pretty big deal. Again, I’m not biased and if anything, I prefer the feeling of a toes more forward squat.