Hi Hilly, I'd just like to add that, whilst correct bike set-up is very important, you've probably just incurred a little soft-tissue injury that will need a short break from cycling to heal, like running niggles need a break from running. The tough hill you cycled up could well have been a part of the problem, especially if you rode at a slow cadence in a big gear (you'd need to build up to that gradually).
To get the best seat height you will probably need to take some allen keys with you on a ride and experiment. I'd disagree with Gavin in a way, as I believe (unless you are nearly fully extending the leg) you should go for the highest saddle position that feels comfy. It's more efficient power transfer that way, and less stress on the knee due to the decreasing stability as knee flexion increases.
Finally, if you have a non-postural leg-length discrepency you can build up the height of the cycling shoe (when you get some) on the affected side by fixing something such as drilled plastic, between the shoeplate and the shoe.
Mowgli