Articular cartilage is the cartilage that coats the ends of bones where they meet at the joint.
The knee is unusual in that in addition to the articular cartilage (that makes up 95% of the cartilage at the knee), there also are the medial and lateral menisci which sit on top of the articular cartilage of the tibia (the lower let bone).
Articular cartilage is rather hard - like the head of a hard rubber mallet.
The menisci are fibrous - sort of like leather.
In your MRI report, "mild narrowing of Knee Joint spaces and altered signal intensity" is describing your articular cartilage.
That there is "altered signal intensity" means that there is damage in the articular cartilage.
That there is "mild narrowing of the knee joint spaces" means that the articular cartilage is thinner than normal. Therefore the top bone (femur) appears closer to the lower bone (tibia) - hence the joint space between the two bones is narrowed.
There is only one type of meniscal tear that is able to be repared - a longitudinal tear in the "red zone" - "red" because there is good supply here. (The "white zone" has a poor blood supply, and repairs won't heal.)
"Posterior horn of the Medial meniscus show small focus of altered signal intensity extending up to Capsular surface and it appears Iso to hyperintense on all sequences." "Grade II degeneration involving the posterior horn of medial meniscus."
The "degenerative" designation indicates that there is no tear present - the meniscus instead probably has scar tissue in it to account for the fact that it shows a hyperintense signal.
My take: Based purely on the basis of the above MRI report [which may or may be a totally accurate representation of your knee], it does not sound likely that you would benefit from your arthroscopy, and seems unlikely that there is a tear in the meniscus (never mind a tear that could be repaired).
MRI's are not definitive.
You would have to discuss how often your surgeon reviewing MRI's similar to yours finds something at arthroscopy that will help you.
My impression is that most orthopods will have your best interest at heart. Many view arthroscopy as a fairly minor procedure - even if there is nothing to really repair, it is unlikely you will have a difficulty from it. And there may be surprise finding that would help you.
So there is no right/wrong answer as to whether to undergo the arthroscopy. Hopefully the above information can contribute to your knowledge of what is going on, and help in further conversations with your orthopod, and in making your decision.
I wish you the best.