You are correct. I have nothing against the British government or the Church of Scientology, but I do think titles of nobility are bizarre and a reminder of our civilization's dark past.
You would have to be the biggest cynic in the world about democracy to think there is no difference between an elected senator and a monarchic (hereditary) title of nobility.
FWIW KBE's are not hereditary titles :-) he can't pass it on.
Here in the UK it is nowadays largely recognised as part of a larger (including OBE and MBE etc.) merit system recognising achievement. A national honour roll.
Now if we were talking about hereditary lordships...
I think there's been a historical shift in what the word 'Knighthood' means.
The knighthoods discussed here are earned and given for different public goods -- charity, business, entertainment, etc. Current Knights include Sir Elton John, Sir Paul McCartney, and Sir Richard Branson. It's not heritable or noble, although of course the origins of the word itself are.
(Interestingly, 'Senator' has undergone the same historical shift -- it refers originally to the hereditary nobles who ran the Roman Empire. It's just managed to get away from the aristocratic origins. As have terms like 'Drugs Czar')
It is the case that it's the Queen who awards these titles, but in the UK almost everything does, officially -- she's a symbolic figurehead -- the powerless root node of the tree of government, if you like.
Does the US have any kind of equivalent system of recognition? France has the Légion d'Honneur, for instance, which is a non-aristocratic, republican order of merit.
(1) You are a computer programmer.
(2) You are not British.
Am I right about either of them? I hope so. I upvoted you in sympathy. :)