Knossos will take care of installing FS2 for you if you have the GOG version or the Steam version. If you just have the files somewhere, it can take care of setting up a Knossos-compatible FSO folder structure using those files.
Once Knossos is setup with FS2, you can delete/uninstall/remove/whatever your old install. You do not need to keep both. You can if you want, though.