Robert,
Knees bending is not a problem and, as you point out, the knees must bend to get the hips back.
You don't want the knees to come FORWARD much. We use "vertical shins" as a cue, even though most people (including Pavel) don't actually keep their shins perfectly vertical.
One common fault is a squatty swing where the hips drop down instead of back and the knees move forward. You have the opposite fault, the "tippy bird" (I believe Brett Jones's phrase) swing where you keep the legs too straight and hinge from the hips, but without moving them back and loading the glutes.
Don't worry about how high the bell goes. Just drive with the hips and let the bell go as high as you hip drive takes it. Trying to get to a certain height beyond this, will lead to pulling with the arms, shrugging the shoulders and hyperextending the lumbar spine.
I also notice that you are off balance quite a bit, with your toes coming up. Try to keep your weight balanced over the whole foot throughout each rep. Your feet should be firmly rooted. We do cue "weight on heels," but IMO this should be considered more of a cue to avoid getting pulled forward than a literal instruction.
Again, take a look at your setup position. This should be what your back swing looks like. But you don't maintain your good setup position when you start to hike the bell back. Instead, your hips move FORWARD as you hike the bell back.