Could the house attached in the annex be built there?
Within the height limits and roof slope requirements, yes.
i.e. the knee wall would be above the second upper floor. Can that really be what is meant?
The architect says that a second concrete ceiling would not be possible at level II.
For your information: the floor area ratio is 0.35 and the plot ratio is 0.6.
Knee wall limits have nothing to do with the residential use of an attic and accordingly also apply to attics. You are talking past the "architect" (I assume he is more of a "so-called" one). You probably mean, regardless of the material, a storey ceiling, i.e., that instead of a ridge-open upper floor, there would be an attic added on top. A plot ratio smaller than twice the floor area ratio usually means between the lines that the attic would no longer be suitable for residential expansion.
Regarding the basement, nothing is stated about how far I would be allowed to extend above ground.
This results, on the one hand, from the avoidance of full storeys, since with basement+ground floor+upper floor you would already be at three full storeys; and also indirectly from the reverse calculation of a ridge height requirement; furthermore often (also indirectly) from the reference height for the height requirements. If, for example, the top edge of the finished floor is a maximum of 0.5 m above ground level, the "basement" protrusion is practically limited by that. You can also name the development plan here (without link!, e.g. "Hintertupfing No. 123 in the cool valley"), several forum members can read those documents. I suspect the house profile shown in post #8 was taken from a different development plan (?)