change scope.knob to var knob.

scope.knob = scope.$eval(attrs.knobData); 
to
var knob = scope.$eval(attrs.knobData);

If you name the data variable $scope.knob in the main scope than the directive will overwrite it and $watch will not function. 
An internal variable is better

src/angular-knob.js

@@ -1,62 +1,62 @@
 angular.module('ui.knob', [])
   .directive('knob', function () {
-    return {
-      restrict: 'EACM',
-      template: function(elem, attrs){
-
-        return '<input value="{{ knob }}">';
-
-      },
-      replace: true,
-      scope: true,
-      link: function (scope, elem, attrs) {
-
-        scope.knob = scope.$eval(attrs.knobData);
-        var $elem = angular.element(elem);
-
-        var renderKnob = function(){
-
-          scope.knob = scope.$eval(attrs.knobData);
-
-          var opts = {}; 
-          if(!angular.isUndefined(attrs.knobOptions)){
-            opts = scope.$eval(attrs.knobOptions);
-          }
-
-          if(!angular.isUndefined(attrs.knobMax)){
-            var max = scope.$eval(attrs.knobMax);
-            if(!angular.isUndefined(max)){
-
-              opts.max = max;
-
-            }
-          }
-          angular.element(elem).knob(opts);
-        };
-
-        var updateMax = function updateMax() {
-          var max = scope.$eval(attrs.knobMax);
-          var val = scope.$eval(attrs.knobData);
-          $elem.trigger('configure', {
-            'max': parseInt(max, 10)
-          }).trigger('change');
-          $elem.val(val).change();
+        return {
+              restrict: 'EACM',
+              template: function(elem, attrs){
+
+                return '<input value="{{ knob }}">';
+
+              },
+              replace: true,
+              scope: true,
+              link: function (scope, elem, attrs) {
+
+                    var knob = scope.$eval(attrs.knobData);
+                    var $elem = angular.element(elem);
+
+                    var renderKnob = function(){
+                        console.log('render')
+                        knob = scope.$eval(attrs.knobData);
+
+                        var opts = {}; 
+                        if(!angular.isUndefined(attrs.knobOptions)){
+                          opts = scope.$eval(attrs.knobOptions);
+                        }
+
+                        if(!angular.isUndefined(attrs.knobMax)){
+                          var max = scope.$eval(attrs.knobMax);
+                          if(!angular.isUndefined(max)){
+
+                            opts.max = max;
+
+                          }
+                        }
+                        angular.element(elem).knob(opts);
+                    };
+
+                    var updateMax = function updateMax() {
+                          var max = scope.$eval(attrs.knobMax);
+                          var val = scope.$eval(attrs.knobData);
+                          $elem.trigger('configure', {
+                            'max': parseInt(max, 10)
+                          }).trigger('change');
+                          $elem.val(val).change();
+                    };
+
+                    scope.$watch(attrs.knobData, function () { 
+                        knob = scope.$eval(attrs.knobData);
+                        $elem.val(knob).change();
+                    });
+
+                    scope.$watch(attrs.knobMax, function() {
+                      updateMax();
+                    });
+
+                    scope.$watch(attrs.knobOptions, function () {
+                      elem.trigger('configure',scope.$eval(attrs.knobOptions));
+                      renderKnob();
+                    }, true);
+
+              }
         };
-
-        scope.$watch(attrs.knobData, function () {
-          scope.knob = scope.$eval(attrs.knobData);
-          $elem.val(scope.knob).change();
-        });
-
-        scope.$watch(attrs.knobMax, function() {
-          updateMax();
-        });
-
-        scope.$watch(attrs.knobOptions, function () {
-          elem.trigger('configure',scope.$eval(attrs.knobOptions));
-          renderKnob();
-        }, true);
-
-      }
-    };
   });