If I may, I think you're thinking about this the wrong way.
I'm not sure if the ATMEGA chip (Ii think that's what it is) can do anything with analog inputs, but even if it could a digital circuit would be the best way to go about it. In other words High for knock detected, Low for no knocking (or vice versa). I know you're thinking that by doing it the way you propose would make it easier to 'tune' to any particular engine, but I think it would only complicate matters.
I believe the correct way to do this is the same way MS does it:
http://www.msextra.com/manuals/MS_Extra ... .htm#knock
Every engine creates knock signatures at a specific frequency in the audio spectrum. For this reason, it's impossible to design a circuit that's a 'one size fits all' type of thing. My idea would be to have MJ simply retard timing by X degrees everytime one of the inputs goes High/Low, and at the same time have a timout which seeks to return the timing to normal after Y amount of time expires. The external amp/filter circuit should be where all the tailoring to the engine in question should be happening. You could have notch filters, bandpass filters, amplifiers, or whatever you need to be able to get false-free triggers external to MJ. This way MJ is not predisposed to working with one type of circuit, and the end user has the freedom to choose how to set it up.
These are just suggestions, but suffice it to say I'm very interested in getting knock retard to work with MJ. If we can get it to work, MJ then becomes very powerful indeed. It would place it in league with the Safguard system, which costs hundreds of dollars more than MJ does. I know for a fact there are Corvair people who don't want to shell out $500 for a Safeguard, so something like this is what those people need. I personally think it would be great, because you never know when you'll get that sh!t gas at the pump. I know for a fact there have been times when my car hasn't run the way it should, and I've had to load a more conservative map to compensate. This would cure most of that.