As far as inconsistencies in stories go, there have been at least 3 origin stories for Mind Flayers that I know of (and that's before we even finished 2e) and I wouldn't be surprised to find recent editions have introduced more of them, or that 2e settings I'm not that familiar with (Planescape, Spelljammer) had their own backstories that weren't completely congruent. Beyond that, I'd never assume that a particular DM was using one canon or another. Running a game in say a Marvel or DC universe would be equally ambiguous. The comics are full of retcons.I agree that separating that knowledge is difficult if not impossible. It rarely comes up at my table, and people are generally more concerned with avoiding resistances and immunities that exploiting vulnerabilities, so the few times people do know something, it is a minor effect. However, I am a person who gets bugged by inconsistencies in stories, so if your character has knowledge about how mindflayers are created, despite being a poor street rat with no encounters with anything more arcane than a magic lantern, I'm going to wonder how you came by this explicit and detailed secret knowledge. It will bother me, simply because it alters your story and would seem out of place.
If a poor street rat knows a bunch about Mind Flayers because his player knows a bunch about Mind Flayers, and he chooses to act on that knowledge in character by relating all the stuff he knows, that's nothing I can do anything about. I can't tell a player how to play their character, and I can't make players forget what they know. They'll have to make choices about what they are comfortable doing. If we need to establish how he knows it, well, that's never that hard to do and in my experience often makes for fun story hooks especially if the player is willing to let me run with that.
Lots of things that players do used to bother me that elicit shrugs these days now that I'm older.
Maybe so, but that's the players choice how to play it as far as I'm concerned. If the player wants to play this as, "Don't worry Johnny, this will only hurt for a little while...", that's the player's decision, and the fact that everyone is taken aback by this reaction might well be interesting. I prefer not to tell players how their character acts. The player has little enough control over the game as it is with me stepping on the one prerogative that they unambiguously have.And myself and the entire table is going to be a little taken aback if their reaction to their kid being strapped to a torture device isn't some form of horror.