Kidder,
I had the same dilemma a while back. I ended up going around the knot and removing it completely. I made that section part of the arrow pass so it ended up more center shot. Turned out pretty good in my opinion. A lot does depend on which way the knot goes toward the belly. Be sure to follow the grain around the knot. Sounds like the stave is long enough to accomplish this easily. Don't know what poundage you are after but 1 1/4" should be wide enough for a pretty strong bow.
Piddler