The classic signs of meniscal (cartilage) problems are:
-Locking of the knee
-Swelling of the knee
You certainly have any of these and the earlier MRI scan would support an injury to a cartilage.
Arthroscopy - looking inside the knee with a camera - can allow the surgeon to trim the cartilage, remove any loose pieces of cartilage or remove the cartilage completely, depending on what they find. The risk of later arthritis depends on how much cartilage is damaged/removed.
If the locking of the knee is significantly interfering with your life I would recommend arthroscopy.