I have heard about this story, but have not been able to find a reliable source to back it up. I did check the link to Yahoo Answers?:http://answers.yahoo.com/question/index ... 025AAW11IM
The best answer seems to be that this story was a hoax. With no evidence other than third and fourth person hearsay, it will have to stay in the hoax department until someone gets in some evidence to support this was real.
There is a story of a satellite that was tracked orbiting the Earth near the equator. This was in Time Magazine and it remains a mystery to this day. I found the link one time, but have not been able to find it again. The story was in the late 1950s (1957? it has been a while), and it appeared they found a moonlet type satellite. The object since disappeared, and I do think it is possible the Black Knight Satellite story comes from this incident.