NIGHT OF KNIVES is a bit of a bonus read, although it does establish some characters who play a major role in Erikson's sixth novel, THE BONEHUNTERS. It's very short though, so you don't lose much in reading it. It's definitely a weaker book in the series, though.

RETURN OF THE CRIMSON GUARD is as vital and essential as any of Erikson's novels in the series. It continues and wraps up major storylines Erikson began in GARDENS OF THE MOON, features some huge developments in the world and story, and is considerably better written than NIGHT OF KNIVES (or, for that matter, several of Erikson's latter novels). In terms of reading order RETURN takes place roughly simultaneously with the events of REAPER'S GALE and TOLL THE HOUNDS.

How STONEWIELDER, his new book due out in a few weeks, fits in is still unclear. It does continue storylines left on a cliffhanger at the end of RETURN, however.