Ismail Yakubu handed the hosts the lead after nodding in Robbie Willmott's free-kick. Within seven minutes they landed a colossal blow. Again Willmott provided the opening, and Conor Washington played in Danny Crow, who expertly finished with his left foot.
Ade Azeez hit back within four minutes of coming on for Torquay, who continued to press but were unable to get the breakthrough as County hung on.
The Gulls have just one win from nine games this campaign and Knill was disappointed not to pick up any points, but he remains positive about their overall progress.
"It's disappointing not to get something out of that," said Knill.
"We were excellent in the second half and what killed us was conceding two. If we had conceded just one we would have come back and maybe won it.
"It was an excellent effort from the players and if you're going to lose that's the way to do it. We looked like the team that was going to win and now we need to put that performance on and take three points.
"We're playing okay, we've lost two away but we could easily have won. It's fine lines but we're going in the right direction and getting a squad together."
Knill was was hugely impressed with on-loan striker Azeez but was also left ruing referee Iain Williamson's decision not to award a penalty after Billy Bodin was brought down in the box.
On Azeed, he added: "He's got pace, good movement and can put the ball in the back of the net.
"But we should have got something. It's a penalty and if it was the other end it would have been given. From where I was standing the lad went for the ball and Billy knocked it around him."