This came up tonight I wanted to make sure about the ruling. If a character is hit for knockback, and the knockback isn't from a straight on attack how does the knockback go? Does the attacker pick a line going away from him and move the figure striaight, or does the attacker move him in a zig zag fashion to a reasonable spot?

xxxxxxxxA
xxxxxxxxx
1xxDxxxxx
xxxxxxxxx
xxxxxxxxx
2xx1xxxxx

Let's say A is the attacker and D is the one being attacked, now I say based on what the rules say I (as the attacker) can move D to either of the 1's or to the 2 but my friend says the only place the knockback can go is to 2. Who's right?

If the knockback isn't a straight line, it's the attackers choice where the target gets moved to.

I have a hard time with this rule. How can an attack not be a straight line. You can not attack on a curve or around a corner. From the diagram A shoooting D is is a straight line.
I have seen a few players take a lot of liberty with this rule.

I've always played that you knockback to the square closest to being in a straight line from the attacker to the "attackee". So, in the example given, I would say spot 2.