It's not necessarily step per se that is the problem. Any exercise, if done almost exclusively, can cause problems like overuse injuries from repeatedly doing similar moves. Also, doing the same thing for most of your workout can cause muscle imbalances; with step, it could very well be overdeveloped quads in relation to hamstrings. If you don't compensate for that in some way (through your weight training or other workouts--hamstrings should be about 65% as strong as quads for good muscular balance), you could cause problems.
Like another poster (I wish it were easy to refer back to posts while you are writing a post!), I like to alternate between step and other forms of exercise, and don't do step two days in a row. 3 days a week of step is about my limit, but I include workouts like IMAX 2 that up the intensity on one of the days I do step.
In theory, the old üp-up/down-down simple moves of early step workouts (like the early Step Reebok workouts) can be beneficial because they strengthen the muscle around the knee. In fact, Gin Miller is often cited as the originator of step workouts, which she used to rehab a knee injury.
I suggest adding some more variety to your cardio, at least one more type, like kickboxing, in between step workouts.
On the other hand, trickier choreography, faster speeds, and more pivoting moves of later step workouts can be tough on some knees. I pretty much avoided step for a while (and I must say, Cathe step in particular) because it aggravated a long-standing knee problem. Then, I discovered that if I removed some of the torquey moves (no "ricochets' for me, thanks: too fast, too much risk of a twist--I'm not meant to move that fast!--I substitute a just-fine and fun-for-me "step sideways onto the step, tap outside foot, back over the top to the beginning side, jack" move) and turned pivots into mambos for the most part (just as an extra precaution), my knees feel just fine!
For me, it wasn't so much the impact as this torque and twist that was the problem (though I've also started using puzzle mats on my workout floor to cushion some impact, and I don't do "jump off the step onto the floor' moves like in IMAX3 "as-is").
