Yes, there is always a slight bend in the knees, but do what most feels natural as you move the other parts of the body. It can be mostly straight if that feels better. Or you can do it sitting it or lying down until you feel better.
In "7 Step" back leg is slightly bent. In "Harmony", when both feet are on the ground, knees are slightly bent. When tilting or extending, let the leg straighten if that is what seems natural.
The bouncing can be very light bouncing.
If you are experiencing knee pain and you have found a variation that helps alleviate that, do that. Everyone is built differently. The forms are basic help guides not meant to be followed slavishly. They help guide the energy and open channels.
The more importantly thing is the mental focus and the breathing.
The motions support these. Much more that than the other way around (though they all support each other, the "yin/yang" balance is more on the "yin": i.e. mental imagery/feeling/visualization/focus and breathing, than on the "yang" (i.e. physical activity).
Too much straightness blocks channels. But so too, does hyperextension of the knee. One has to find one's own balance point on all of these.
Most important thing: feel the flow of the energy.
