I'm afraid I have very little experience with this, and no experience in a coaching context. Knee plica falls under the rubric of what an emergency physician would consider an "internal derangement of the knee," with referral to sports med or ortho.
That said: squatting partial depth is not the answer. Your PT is just talking out his ass. Ask him about the large longitudinal studies of long-term outcome in patients with knee plica who squat heavy below parallel. That's right: there aren't any. It might make your knee worse. It might not. Popping is not the problem. If your knee wants to pop, let it pop. Inflammation and pain from the plica rubbing on your femur, on the other hand, are problems, and there is a potential for things to get worse.
Your options are:
Option 1. Don't squat. Wouldn't be my first choice, but does give you time to explore Option 3 (below).
Option 2. Continue squatting to depth, ignore the pop, and See What Happens. Three scenarios obtain:
Scenario 2a. Knee starts to hurt. (Stop squatting, see option 3.)
Scenario 2b. Knee doesn't hurt. (Keep squatting.)
Scenario 2c. Knee explodes, mid-squat, into an ultra-high-energy fireball of quarks and gluons, creating a black hole that swallows this wicked, wicked world. Probably at the worst possible time, when you have the most to live for.
Option 3. Just go to an orthopod, tell him Squatting Is Your Life, ask him to break out his propofol and his arthroscope to fix the fucking thing, and get it over with. This is an excellent option.
Please observe that Option 3 can be exercised either BEFORE or AFTER the knee starts to hurt, but cannot be exercised once scenario 2c has materialized. Once your knee destroys the universe it will be too late. Even if you have Blue Cross.
Wish I could be more help. In all seriousness, let us know what you end up doing and how it turns out. This is a new one on me, and I'd like to know for future reference.
Maybe somebody else with relevant experiences will have something more helpful.
This post is for educational, illustrative and entertainment purposes only, and does not represent medical advice for any particular patient, medical condition or elementary particle. No particular exercise program is advocated herein. Sullydog doesn't know from plicas. He's really kinda full of shit, he's not your doctor, and he is absolutely not to be trusted. He once stole ten dollars and a pack of cigarettes from his Mama. No doctor-patient relationship is established by this post. Individuals with medical questions or problems should seek proper medical attention. Quark-gluon plasmas are extremely hazardous and should not be handled without specialized training and permission from the gummint.