C.S.
We started riding with our sons the summer after they turned 1.
We've stopped with the older one when I became pregnant & wasn't biking [my husband doesn't bike.]. By the time I could ride again, the oldest was big enough to ride his own bike [nearly 4, 35-ish pounds]. The older one's gotten an occaisional ride around the cul-de-sac, and it's not that tough with a bigger child, as long as they keep their feet in the foot rests & out of the way for pedaling. I've done enough biking with heavy / oddly weighted loads that having a child on the back doesn't make me feel unstable.
We chose to get a rear seat mainly due to price & availability. The one complaint I have with it, is it's hard to carry stuff other than the child - the seat prevents you from using a rear panier, and a backpack would be in the child's face if the paretn were wearing one. We resolved this by getting front paniers.
In hindsight, a front seat would have made it easier to pack along standard diaper bag stuff, or a picnic lunch. It's also probably easier to have a conversataion with your child, or at least comment on the sights you're passing. With a rear seat, I'm rarely sure he can hear me. I can't speak to whether or not it feels in the way of your knees.
The trailers also resolve the storage problem. Plus, you might get more use from a trailer - even after your kiddo 'graduates' to riding his/her own bike, you can still lug stuff in the trailer [library books, lunch, sports gear for a park trip, etc].
Happy biking,
C.