First, a point on definitions:
- Stretching - To lengthen a muscle. (Sit ups would not be considered stretching.)
- Strengthening - To contract a muscle against resistance.
- Cardio - Any exercise to raise your heart rate.
All I can do for activity now is to lie down and come up and touch my toes without moving my knees.
Actually, you have a lot of other options. At 33 y.o. you are too young to become a couch potato. If your doctors have advised you to avoid weight lifting, running and jogging, you need to find someone who can tell you what you can do.
A physical therapist (physiotherapist) is a good place to start. Without strengthening exercises for the hips and legs, your knee ligaments will have less protection. A good therapist can also give you advice on overall exercises suited to your skin tolerance and get you started on a good program.
As for your toe touching sit ups, there are better ways to strengthen your abs.
To achieve a cardio workout, you generally want to warm up, exercise in your target heart range for 10-20 minutes if you are a beginner - increasing to 30 minutes or more as your tolerance increases, and then cool down.
You can use many kinds of exercises to achieve a good cardio workout: cycling (stationary if you worry about your knee), elliptical trainers, circuit workouts, swimming, pool running, nordic pole walking, rowing etc. Just check with your therapist to see which ones are best with your knees.
Exercise will help with your diet, but since you are not having the results you want, you may need to refine your diet also. Weight around your middle is not healthy. A registered dietician may help you get on the right track.