OKAY!!!!! Look down below that square thingy you just mentioned and between the cam stack - there should be a horizontal pin - clean it with solvent. If you push on the needle bar about where the little square thingy is - it should move that pin in and out side to side.
There is a spring comes off once in a while and you have the readers go places they shouldn't - you won't be able to fix that if it has - not with out another 401 right next to you or good pictures. Shoot a picture so we can help you figure out what is going on. I need a good clear shot of the top of the machine - like the one where we show the oil places. Your problem is NOT the knob. Don't worry about that knob for a little while. There is something stuck, a spring off of it or some dried piece of oil you haven't found.