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Weird. It's been a while since I played the ps1 version but I don't remember the zombies respawning. Maybe if you are playing on a higher difficulty which I don't remember if I did. You are probably just not completely killing them. You must shoot them until there's a pool of blood, that's when you know they are fully dead.

And yeah ditch the knife. It is completely useless because while bullets are scarce you still get enough to kill every enemy unless you go out of your way to waste them. If you find yourself in an area with too many zombies and not enough bullets trying going to a different room where there's just one or two, it's a good idea to start shooting a zombie only if you know you have enough bullets to kill it. And once you find the shotgun things will get easier.