Try a card scraper. They can be made at home from thin steel like handsaw steel (which is typically an alloy like spring steel, alloy commonly used to make... springs). Or you can buy them from any woodworking supplier for a few bucks. I really like this one. At the bottom of the listing is a video of how to sharpen and burnish any card scraper.
https://lostartpress.com/products/crucible-card-scraper
Use the card scraper to get a very clean surface on your knot, then go back to the usual sanding of the piece overall. Knots can be rock hard compared to their surrounding wood, especially in softwood species. The surrounding wood will sand away faster than the knot, making the knot stand a bit proud of the surrounding surface. Use the scraper to pull-cut very fine shavings off the knot surface only (working from different directions) and you may get an acceptable surface in the end.
As for your finish coats, you may need to be prepared to accept a somewhat different look of your finish on the knot vs. the surrounding wood. Blame that on absorption into the different grain structure at different rates. A thick, multi-coat surface finish may blend it in, but typical Danish oil finishes may leave it looking different. Not bad by any means, just different. Use this piece as a learning experience and let Nature be your partner in it. Good luck!