Are you saying that even if someone else published a work under CC-BY, you couldn't publish a derivative work as a Knol article, even if you attributed the base work to the author as required by CC-BY, and published it under Knol's own CC-BY licensing option?

That's my understanding, yes.

Would it be, not because you can't re-mix a CC-BY work into your own CC-BY work (everyone says you can do this), but because you can't grant *Google* the unlimited right to create "derivative works", because that would include derivative works that don't include the CC-BY attribution?

I'm not entirely sure. Depending on jurisdiction, there may well be moral rights to attribution granted by law in addition to whatever rights are reserved when granting the license, so that might not even be an issue. I think it's simply a matter of you not being able to grant a license to someone else's work, regardless of what that license says. If it's a derivative work, then it might be ok, since you're the copyright holder of that work and it just contains, under license, someone else's work. What people have been doing, however, is just copying stuff straight from Wikipedia onto Knol and no modifying it at all, it that case it isn't a derivative work it's just copying the original work and you certainly can't grant Google a license to that. I'm really not very sure how all this works - I need to go and read CC-BY in detail, for a start! (I've read GFDL in plenty of detail, but have never had a need to read the full CC licenses properly, I've just scanned them.)