An update:
After two complete cycles through the washer, more than an hour in the dryer, several hours of [expletive deleted] detangling and most of a day hanging outside I think the yarn is now usable.
I have seven hanks without knots totalling ~700yd. I have one hank that is almost all knots that doesn't count in my yardage total.
Most of the black coloration of my wash water was *probably* dye bleed off the yarn. The colors of the yarn have softened significantly. The yarn bloomed, fuzzed out (which accounted for most of the detangling) and improved greatly in both appearance and handle.
I do believe I won't knit it. If I can find another hank I'll have enough to weave two strands together on the tri-loom, which ought to make a very nice shawl. Two more hanks will let me fringe the shawl and I'll probably tie beads onto the fringe to keep the fringe from disintegrating.
So yes, ladies, if you have any sari silk in your stash I strongly recommend scouring it out before you work with it.
+++++++++++++Reply to the list as I do not publish an email address to USENET. This practice has cut my spam by more than 95%. Of course, I did have to abandon a perfectly good email account...