bad knees....exercise substitute for squats and lunges

Glute bridges

You've had some good suggestions above. Another thing to check is proper form on the squat (legs shoulder width apart, feet at ~30 degree angle, push knees out, break horizontal). The quarter- and half-squat crap you see done in most workout video settings puts ridiculous strain on your knees. I've got pretty crappy knees myself, and I was surprised how well I could do "real" barbell squats (after proper warmup) -- much easier than the too-fast bouncy-bouncy squats in most videos. Mehdi's Stronglifts site has some decent discussions of technique, although I got the most benefit from reading Rippetoe's "Starting Strength" book (only $10 in Kindle format) -- the diagrams and discussion of balance really clicked with me.

Good luck to ya!

Yes, squats above parallel cause greater "shear" forces on your knees and will cause you a lot of pain. Additionally, if your glutes and hamstrings are under-developed they will not do what they're suppose to do in the squat and your quads will be overactive which will also cause you problems over time.

i was in pt for my knees and i did squats and lunges (of course, not on day one). focus on proper form. a lot of knee issues originate from above (butt, hips).

Abductor and Adductor Machine

I have had terrible knees my whole life, to the point of a handicapped parking sticker for awhile. In the past year, my trainer "fixed" me so well I can do anything and its like they were never wrong - just an occasional twinge... what helped me (all together, not sure if individually it would be the same!):
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1) barefoot shoes. I have flat feet and was always trying to get better arch support, etc. tried thousands of insoles, etc. Turns out, my knees like it au natural! I only wear barefoot shoes now...
2) foam roller - on every part of your legs and back. IT band, quads, hammies, inner knee, lower back, etc.
3) *Muscle balance* (the most important!) Muscles are all inter related - if you have a weak left calf, you will feel it in your right calf and hip etc because you are compensating.. the part that hurts is not the part that is the problem usually - its the result of overusing that muscle or joint to compensate for one not doing its job. Strengthen the weak guy and the others wont have to do double the work. With knees, if your quads are stronger than your hamstrings, your knees will pull off track. If your inner leg muscle is stronger than outer, etc.. My knees hurt because the muscles were pulling my kneecaps off center and rubbing them against bone. It took a few months, but he balanced all the muscles in my legs and back out so everything pulled correctly and none were compensating for others. I was also seeing a chiropractor for my back - turns out the muscle imbalance was causing my back pain as well - compensation again! They explain it much better, but the chiro agreed with the trainer, and I no longer have to go there at all!

Not sure if that will help you, as "knee pain" could be anything. But if you have been to a 1000 drs like I have over the years with no real cause (no arthritis, physical abnormality, etc) it is worth exploring. I can now squat (correctly) 175 pounds and getting better. Only time I have any issues with my knee is when I wear regular shoes or let my knee turn inward while walking.