Does liquid in the knee hurt? I have extreme swelling in the knee along with popping and slipping of the kneecap. I also I have pain along the acl?

Yes. The liquid, which we call synovial fluid can build up pressure and hurt. The liquid is there because of the surrounding structures, cartilage that may be slipping, a torn meniscus, a torn ligament. You evalaution will look at this and you will need imaging: x-ray, ultrasound or MRI or all three to help clarify. An orhtopedic surgeon may need to do arthroscopy to see insie the knee.
Water on the knee. There are basically two kinds of situations with water on the knee. Acute injury to the knee joint or cartilage causes inflammation and swelling which is associated with pain. Chronic arthritis of the knee joints can cause acute, large, painless swelling at times when the knees are not painful. Popping slipping of the knee cap suggests a tendency to subluxation, but is not usually assocated w swel.