if you go on the inside, meaning you cut the knot off, you will have a narrow bow, meaning a lighter draw weight bow, or an Indian D bow. If you go on the outside, work super carefully. Why? Because the ring around a knot may want to go deep into your bow width. Rasp carefully, and then sand it down.
BTW, in my humble opinion, shooting of the hand works well. Cut in arrow shelves can come later. Someone on this site said that more deer have fallen to bend in the handle bows, and for good reason. They don't look fancy, basically a well tillered stick, but they hunt good, and are becoming a real favorite of mind because they tell you when you are at full draw.