Having thyroid disorders can often lead to many other types of other auto-immune disorders. Rheumatoid arthritis can be one which can cause the knee problems you mentioned.
Was it the belt buckle that rubbed on your skin? Often the metals can cause skin irritation, Urticaria as Smilerdeb mentioned, Nickel allergy is very common, also. If the belt was leather, there are tannins in the processing that can cause a welt. If it was a plastic based one, then again, it can cause welts.
The fact your knees are so sore and red, makes me think you need to get some anti-bodies blood tests done. The way thyroid anti-bodies affect joints is quite well known. I personally have had issues with my left knee.
Cheers.
Sounds like Uticaria to me.
Have a look at my pics and tell me if the welts are the same.
Mine was from a plummett in FT3 levels and severe stress causing me to be Hypothyroid.
I ended up needing Prednisolone after Anaphalaxix episode.
The swelling is usually due to hypo levels.
I would be going for labs as you may need your T4 med increased.