I'm 38 as of yesterday. 15 years ago, I had both knees crushed in a car accident, which resulted in broken cartillage, torn ACLs and meniscals in both legs. Basically, I was a wreck.
I've still never had knee surgery. I was told that to correct my knees, I would besically be in a wheelchair for 6 months, then crutches or cane for another year. For each leg, and they wouldn't do them separately. Grand total, I'd be incapacitated for close to 3 years, which to me was unacceptable - I have to provide for a family.
Eventually, I managed to do a lot of physio, and some obscure treatment from Russia that I don't even know what it was. I also use "dit da jow" liniment, which I learned to make when I was into shaolin.
Long story short, I can walk, but the knees are a lifelong struggle.
Now, I've been doing martial arts since I was 12. Until my accident, I concentrated on northern kung fu styles (tang lang chueh primarily) and muay thai. I also studied a couple forms of shaolin kung fu, and yang style tai chi.
I can't to anything "acrobatic" any more, but I have found that I can still perform some of my southern shaolin (five animals/hung gar), and I can do jiujutsu. I can also do some basic muay thai, but can't take knee impact so well, so I concentrate on elbows, and incorporate that in with my other grappling techniques. No high kicks, and I tried Yoshinkan Aikido for a while, but found all the "knee walking" was murder on my knees so I had to give that up after a few months.
One thing that surprised me though is that I can work on plyometric exercises, and my knees improved drastically after that. I'm almost normal most days (unless the weather is cold or rainy).
So, my recommendation:
(1) Tai Chi is great for physio.
(2) Jiujutsu is good, because groundfighting doesn't require impact on the knee joint (although it will work your flexibility)
(3) Get yourself a copy of a good plyo program, or better yet, P90X which is what I use. I'm immensly stronger all over now that I've been doing that, and it's helped my overall fitness, but especially my knees.
Since starting P90X and working my leg strength and plyo (2 days a week on those), I've even begun to be able to apply high kicks again, and feel that if I keep working my legs/knees, I feel confident I should be able to do some of my old forms and techniques again!
Bottom line, DON'T GIVE UP. Don't let your knees keep you down if you don't have to. The worst thing for them is complacency and inactivity. They'll deteriorate at an unbelievable rate now that you have an injury. Even if it's uncomfortable, difficult, or slightly painful to begin to rehabillitate them, you MUST if you want to function later on in life.
Chris.