The pronoun in 'We chose them' refers to the Children of Israel. And 'with knowledge' is in the position of a state, meaning: being aware of the place of choice, and that they are deserving of being chosen. It is also permissible that the meaning is: with our knowledge that they will stray and that they will commit excesses in some situations, concerning the scholars of their time. It is said: concerning all people due to the multitude of prophets among them, from the signs such as the splitting of the sea, the shading of the clouds, and the sending down of manna and quails, and other great signs that Allah did not show in others like them. Truly, it is a clear blessing, because Allah tests with blessings just as He tests with calamities. Or a clear trial to see how you will act, as His saying: 'And in that is a great trial from your Lord.'