I also have a lot of knots in my cedar canoe and I think they make the canoe look like it is made of wood. They really add to the appearance of the canoe. If the strips would bend without breaking I used them. Once the hull is glassed on both sides it becomes one piece.

I used a Stanley surform (flat cutter on the outsde curved on the inside) to fair the hull. As long as it was sharp it cut through the knots just fine. I then used a 1/4 sheet finish sander to smooth. I made curved styrofoam pads that I put under the sandpaper to sand the inside curves.