Presumably the knights would dismount BEFORE the battle (i.e. during the deployment phase) and then be unable to mount until after the battle. If we are talking "realism" (which we perhaps should not be in this case) this is what would happen IRL: a knight may have mounted up before the battle or left their horse with their page.
However, I am not sure dismounted knights is very good for the gameplay since it gives so much flexibility to a unit. This can of course be compensated through costs and squad size, but it takes away from the strategic choices involved in putting together your army. "Realistically", there were of course no "Greatsword knights", "Mace knights" or "Sword-and-shield knights". Knights were proficient with several types of weapons, and would use different weapons depending on what they were doing. This is something which videogames ignore because it gives too much flexibility. KOH2 will (I presume) be "unrealistic" in this sense: knights will not be able to use several types of weapons. I think it is a good think if it also is "unrealistic" in that knights must choose between being on horseback or foot.