I know that this might sound crazy to you diehard twisty junkies but do you think it is possible to lower and place slightly forward the foot pegs. My left knee is toast and the stock rear sets places my feet a little too rearward for comfort. Because of this I only rode the SD 900 miles this year. Probably not a viable option but I noticed a guy selling a Guzzi Griso that had lowered pegs as an option. Its not like I'm dragging a knee in the corners or ever will.
I most likely will have to sell the old girl to get something more comfortable but don't want to spend the money on a newer bike and I like the LC8 engine. SMR and SMT are options but different rear sets are more cost effective.
Any suggestions?

Very adjustable rearsets.

Back in the day I knew someone who had gilles rearsets on a 916.

When I looked at them I realised the peg position was lower and further forward than my own std (tiny little) pegs.

They looked like shit (tacky gold anodised) but they moved the pegs where he wanted them.

This could work:

You can choose different offsets, 22,30 or 50 mm, and the pegs can be rotated forward.
Website: http://www.whaccessories.com/FootPegLoweringKit.htm

One of my winter projects is to make new peg hangers that would put the pegs about an inch to an inch and a half lower. My knees are bad as well and the lower farther forward position would help standing on the pegs when riding on our third world roads...

I had a set of these on my 1050ST with the 30mm drop arms and they made a world of difference. They're made by MFW in Germany, are good quality, easy to fit and much cheaper than a new bike. I never had any ground clearance problems even using the tyres right to the edge.

My knee's are complete shite as well ,,however after I put my left leg on the peg (an inch up and back from standard) thing's settle down a bit for me,,,I just can't be "more" comfortable with "lower" peg's ,,won't work for me at least,,,,gonna live with it,,,,,

I've heard of Buell pegs fitting many bikes that lower the foot position.

DP is right, adjustable is the way to go. That way if you do want to go a little crazy you can change them back.

I know when I was looking around for the Daytona that Gilles, Woodcraft and I think rizoma made them?!?!