By the way, I don't feel that any of the resources I listed above give a sufficient explanation of why this puzzle makes sense (the clues and logic behind it). They're decent enough as hints or walkthroughs, but just missing some of the details and the story logic. So after you've solved the puzzle using the hints above and talked to Grandma Knight about what you've learned, if you think the solution was weird and you want to know my take on what the clues were meant to be and how they connect, I'll include that below:
(We were recently talking about this on the AdventureGamers forum so I am copy-pasting with a few tweaks.)