I've heard the opposite - people I know with knee problems use the treadmill rather than the roads until it's cleared up.
Personally I wouldn't touch a treadmill with a bargepole, I hate gyms with a passion.
Run off road.
Is supposed to damage your knees if you dont have it at an incline apparently- should be at 1.0 at the least incline on most treadmills takes shock away from your knees i was told when i changed gym.
Old wives tale. Read this for some informed discussion of treadmill vs road running:
http://mysite.verizon.net/jim2wr/id110.html