The ship story is correct, and why we spell it knots, instead of nauts.
If you tie a knot every 100', and play it out for one minute, the number of knots that went overboard is the number of nautical miles you'll cover relative to the current in one hour.
Nautical miles are nice because they line up with minutes of latitude, but meters have a basis in the earth's size as well. It's pretty close to 10,000 km's from the equator to the pole, or 1 million meters. If the french had been successful in changing angles so they were decimal instead of based on 360 degrees, it might have been a pretty nice system. Since they didn't succeed, it's 1852 meters per minute of latitude, which really isn't that nice.