Michael has some great points. There is no comparison between someone skilled with a knife and someone who is playing around with one.
The fact is a skilled knife fighter will only let you know that a knife is involved after he has already seriously or fatally wounded you. You will often never see it coming.
Those who pull knives out and wave them around for intimidation effects are often doing it for the psychogical effect they hope it will have and are often neither skilled nor knowledgeable in its proper use. They will tend to do things like hold the person close at "knifepoint" like Alex indicated in his first story and then proceed to think that this intimidation alone will work to stop some form of counter attack on the part of the victim. Some of these folks often don't even have the right mindset to cleanly and fatally knife someone if necessary (i.e. when they flinch), thinking that the intimidation factor alone will be enough for submission. In these cases counterattack is often effective, but it is in no way comparable to a possible encounter with someone who really knows how to kill with a knife and is mentally capable of doing it instantly.
Even in the RMCAT Reality Based training program and other similar programs it shocked many to realise how easily a handgun wielding defender at 21 feet could still be fatally wounded with a knife before he/she got off enough rounds that would effectively stop a motivated knife wielding attacker. And this is in the case of an extremely motivated untrained attacker, not a trained one who may know exactly what targets to strike to maximise the possibility of death (Fairbairn's system comes to mind).
I do agree that the "OMG, freeze and sit there and become sushi" reaction is a possibly fatal one against any sort of real attack, so it is important to condition oneself to get past the knife (or other weapon) and get to the person wielding it. For me the resistance tanto randori training we do has worked for all of my students who have been involved in knife encounters so far, but it is because we keep a healthy respect of what could be done with a knife (studying kali and CQB style attacks and defenses also) in the right hands so we take no chances when we go for the person.
Reality defence has so many unknown factors that it is difficult to simulate all scenarios in any training regimen, this is why knowledge of the psychology and physiology of violence is important alongside any other training.
Just my 5 cents.