What is the history of the silent 'k' as in the word 'knight'? Was the k sound ever pronounced? Were other words spelled w/it and the letter 'k' eventually dropped?
Yes, up through the 17th century the <k> was pronounced in the word knight and other words starting with <kn>. (In knight the <gh> was also pronounced, so knight contained five sounds, not the three it has simplified to today. See the answer to the earlier question concerning <gh>.) The change from [kn] to [n] was, as usual, due to a tendency for speakers to make pronunciation as easy as possible, often by assimilation: The [k] is pronounced at the back of the tongue, the [n] towards the front. To make that transition easier the [k] softened to a sound similar to the sound at the end of the Scottish pronunciation of loch, then to [h], and in a few pronunciations it even assimilated to [d] and [t], bringing its point of pronunciation right up front with [n].
The same process occurred in the simplification of [gn] to [n] in words like gnaw, gnarl, gneiss and the like.
Since the loss of [k] occurred so late, during the 17th century, there do not appear to be any cases where both the sound [k] and the letter <k> were dropped, though there are some variants that suggest that the process may be underway: knib, nib; knick-knack, nick-nack; knob, nob..