Am I correct in interpreting this feat; in that if you have 6 ranks in a knowledge skill, it provides no bonus?
Yep. Now, if you get to the point where the feat isn't providing you any bonus at all, you should talk to the GM and get permission to swap the feat for something else, as clearly your character concept has changed a bit.
Hmm... I think it'll still be good for my Bard... can't max out ALL the Knowledges... +2 in 4 or 5 Knowledges ain't bad... who needs to do stuff in combat? ;)