If you are a player purchasing the DUNGEONS and DRAGONS rules in order to improve your situation in an existing campaign, you will find that there is a great advantage in knowing what is herein. (OD&D Volume I: Men & Magic)It's the first line of the second paragraph of the bloody rules! The first paragraph of the introduction is written specifically to referees, making this second paragraph the very first statement made directly to potential players. As a referee, I never had a huge problem with players knowing the rules. My reasoning was they should know the basics of How Things Work™ ... just as we know by experience and observation how our world works. They should know the basics of the protective factor of armor, how far an arrow flies, how tough a giant is to kill, and how likely a blow will actually hit an opponent. Of course I always caution against assuming my goblins (or any other monster) are the same as the rulebook goblins, doing so might get their player-characters killed. Some things should be a mystery, after all.
SHOULD THEY KNOW? I'm speaking from supposition and not experience here. Because I was the first geek in [small town in TX] to own the rules I had to know them well enough to run the game. Thus, I never had to play OD&D without thorough knowledge of what was in the little box. Still, years of running the game allows me to speak from cumulative experience.
Excessive gamist thinking tends to pull players out of the game and into reality. Suspension of belief is a fun part of the game for many of us ... even the referee. When folks ask me how players opened locked doors or chests when there was no thief in the game, my reply is how would you do it? Don't think only a thief can pick a lock, if you yourself were actually in the game with the resources your party had, how would you open that locked door?
Player-Characters don't "know" they have only 1 hit point left during a fight (you feel weak and your vision is beginning to blur), they have just gained second level (your experience has taught you a better way to use your sword and shield in combat), or the monster has a high armor class (you gasp as your powerful blow harmlessly glances off the young dragon's hide). On a personal note, I think it's more fun when you don't know all those things. I played in a campaign here in Austin TX in which a monster's AC or a magical sword's bonus was discovered by trial and error. I know many players feel the same way. But ...
DO THEY WANT TO KNOW? Geeks (and I use the term affectionately) are a smart bunch of guys and gals. Some just can't relax until they've unscrewed the back of the cuckoo clock and disassembled the blasted thing to figure out how it all works. There are just as many who feel this way about the rules of the game as those of us who feel looking at the man behind the curtain steals the magic away from "The Great & Powerful Oz."
A common theme in my 'blog writing is "what do your players want?" A player having a well-rounded knowledge of the game can be a big plus at the table, as I learned when I was conducting a Traveller campaign and overlooked a significant rule in ship-to-ship combat. Then there is the darker side of same. As alluded to in my previous post there are barracks room lawyers out there who want to beat every bit of advantage from the rules; this being fun for them. Unfortunately their fun usually sucks all the joy from the game for everyone else at the table.
SO? SHOULD THEY OR SHOULDN'T THEY? In my opinion, a basic but not specific knowledge of the rules is the best way to proceed. Whether you agree or not, don't allow yourself to believe not knowing is an authentic "old school" (how I hate that term) playing experience. Focus on the behavior and desires of the players. Explain to them you'd like to try running the game with a minimum of knowledge on their part, though they will still need certain specifics such as prices, how their spells work, etc. Most players will enjoy the challenge, even if it makes them feel uncomfortable. If the majority of your players do not feel this is a good way to proceed then pass out the rulebooks with a smile ... along with the caveat these are merely suggestions not rules. An evil smirk and brisk rubbing of the palms together whilst making this pronouncement will go a long way toward keeping your players on their toes!