Let's start with "What spells you know" - A spell you know is one you copied into your spellbook. So in this case you can copy spells into your spellbook based on your level in that class. So you "determine" what "spells you know" based on the level you have in the class you want to "know" the spell in. This is determined "as if you were a single member of that class"
Does that help?
I had the impression that was talking about the spells you received when you went up a level, as opposed to "known" in the broader sense.
But I can certainly see your interpretation. It's a strong position when it comes to rules as written. I don't know that I would be inclined to argue further. I'd accept that as being almost certainly the intention behind the rules as written.
Meaning the higher level slots available would be there solely for upcasting lower level spells.
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Just to be clear, I've never gotten into 5e, so outside of BG3, I know next to nothing about it. I'm one of those people who never cared too much how true the game was to the book, but I recognize that others feel differently. Strongly so, sometimes, it appears.
