I am thinking of changing the way knowledges work for creatures. If a character has Knowledge Nature with a Rank of 2 then he should know or have heard of all Knowledge nature of CR2 creatures. The character must still role and the higher the role determines if you give him just the name of the creature role of 5 or if you just hand the character the MM role Nat.20. Will this over power the characters?
Essentially that's the same as letting the players take 10 on Knowledge checks. That's not more powerful than usual, it just makes the ability more reliable. This makes things simpler - you definitely know that a cleric with 4 ranks in Knowledge (religion) will recognise CR4 undead. However, it also means he has no chance to recognise a CR5 undead, nor can he fail to recognise a CR5 undead.
Basing the check DC on CR instead of hit dice makes it more powerful since many creatures' HD exceeds their CR, but it does make more sense this way since in third edition D&D, hit dice is a poor judge of power. A lot of monsters are given unusual numbers of hit dice since some monster types' hit dice are more powerful than others. The DC to recognise the tarrasque is CR58 - at level 20, a wizard will probably have only +33 at most to that check!
So in short, yeah, go for it. I recommend setting the recognition-level to the number of ranks they have minus about three or four, thus it's either equal to their level, or almost equal and you realistically can't recognise most much when you're only level 1. Only let them know a basic amount, not an expert amount, unless they have a lot more ranks than necessary.
You may wish to make it easier to know a creatures name if it's particulary.. legendary. Every bard worth his salt for instance, knows at least one tale involving the tarrasque. He probably doesn't know anything else about it though.
Yeah, after all one should assume that most people have heard of dragons even without knowledge(nature). Or vampires. Of course not all folk tales are exactly true but still, they contain some useful information.
And on the other hand one could assume that there are obscure low-threat creatures too, and no ranger in Oerth would know that tweetybird from third layer of Abyss explodes when it comes to contact with silver, even if it is only a CR1 monster...
So for my taste it is a pretty too fast-and-simple method...works probably on generic stuff but still DM needs to keep close eye on the subject.
That's been my problem with the knowledge checks all along, too. They fail to take creature rarity into account, merely assuming that the more powerful it is, the less is known about it, when the inverse is probably true for the most powerful of creatures. Almost every scholar, regardless of training, knows you need magic weapons to hurt a great wyrm, and they cast spells as powerful as some of the greatest of mages and priests, and that the tarrasque can't really be killed, and that balors have magic swords and explode on death and are wreathed in flame, etc. They probably also know that kobolds and goblins are about as dangerous as a talking sewer rat with a weapon. However, they might well have no idea that a corrolax can evoke a mind-numbing blast of colors, or that a catoblepas can shoot death rays. However, coming up with such a rarity modifier would be completely subjective and up to the DM, and require and unnecessary amount of work, truth be told.
I think the system described above is in no way game breaking, and probably only a little more powerful than the current method. If you want to use that, go for it.
Actually, they did that with Hordes of the Abyss, although I think that strictly going by the info handed out in the books is actually a little skimpy. There's so much more lore and so many other features that can be handed out. I think there should be two or three pieces of info delt to the players about the monsters on a successful check, but that's just my style, and I more or less adjudicate things as I see fit when it comes up.
I'm actually planning on amending the Knowledge Check in my own games to a DC 10+CR, with an ad hoc modifier based on rarity. Everyone and their dog knows what a vampire is (I mean, it's hard not to kill a vampire), but they're not going to recognize a Neogi very easily -- the slaves don't often escape. I figure that for the majority of the critters in the monster manual, modifiers would probably be less than five. A -5 to the DC means that the PCs get one more piece of solid information than they otherwise would, while a +5 means that they get one less, to a minimum of nothing.
Maybe they need to make a monster lore or Creature lore skill built around how rare something may be?