you might be facing ARNOTE 170078..After selecting knowledge template
For this you need to add your submitter/user which you are using to create
Knowledge article in to support group and assigne role for the same.
1]you have knowledege permission(it will be there already o.w it would not allow you to select template)
2]Support group is must
make sure the user has knowledge user permission(under login access details tab of the People Form) as suggested by sam here and also should be a part of a support group atleast or could be part of multiple but if it is multiple then atleast one support group should be set as his Default Support Group.....in the People Form Support Group Tab....
Are you using MIDTIER OR SMART?