That is exactly the kind of bike I had in mind for you, based on your comments. One thing to consider, and I don't want to dissuade you, cycling is not necessarily good for your knees. For those that ride hard/for a long time it is the number one complaint.
I second Brandon's comment about lycra. It's a process, everyone that get's into cycling goes through it. Might as well skip the awkward phase of wearing jeans and a BMX helmet.
As for sizing standards, it varies. Most mt bikes are s/m/l, but there are some brands of road bikes that size the same way - Giant for instance. They are the largest bicycle manufacturer in the world..