When I squat I go as far down as my body will physically let me, hams touching calves, and it's never really bothered my knees. I find my secret is making sure I do a VERY thorough warm up first, here's my quad warm up:
5-10 minutes on tread mill
10 reps with the bar
6 reps with 135
5 reps with 225
2 reps with 275
2 reps with 315, then my working sets.
When I follow this type of warm up, I don't get any knee pain no matter how deep I go.