I'm not sure there's a single right answer to this question - much depends on the formality of the situation, social graces, tone of voice, even what has been said before this point in the conversation. For example, one "I know" might be acceptable:
The movie starts at 8pm.
I know, thanks.
...but a continuous barrage of "I know" as a response to every sentence can come across as condescending, arrogant or sanctimonious, depending on the situation of course. So your assumption is correct - I know can often kill a conversation, as it can (rightly or wrongly) lead the other party in the conversation to believe that you either don't want to engage further in the conversation, or what they have to say isn't interesting to you.
There are various different ways of dealing with such a situation. Often one might feign ignorance, or at least downplay one's knowledge of the situation:
I heard that Jane might be looking for a new job.
Oh really? that's interesting.
Another approach might be to agree with the other person - acknowledging that you also have the same knowledge, but in a less of a confrontational manner:
I heard that Acme Labs might be closing down.
Yeah, I heard the same thing.
As I said, there's no single correct answer, much depends on the situation, relationship with other parties in the conversation etc, and I'm sure that other people will have alternate suggestions.