In a broad and general nutshell:

The Idle Air Control Valve does what it's name implies, it helps
regulate the idle speed of the engine (at startup, when you turn on the
A/C, etc.).

The knock sensor detects engine knock/ping and the car computer (ECU)
uses this information to control the timing of the engine.

I would recommend having the IACV replaced, reset the ECU, and see if
the knock sensor failure is re-detected by the car (you'll have to
check the ECU for stored codes again in a week or two).

Cheers,
Nirav
96 Max GLE, 121k