You are right: "I KNOW NOTHING" is proper English. No double negation in general. You won't be able to hear someone speaking like that in Britain.
And you are wrong: "I DON'T KNOW NOTHING" or "I DON"T TELL YOU NOTHING" is popular English in the American mid west. Just watch those westerns, you will notice many popular ways of speaking English like that. This is due to the earlier under-educated immigrants from Ireland, Walse or England. But be careful when you talk like that with non-Americans. It's sure as hell it won't be appreciated.