Does "biết" mean both "know" and "know how"?
"biết" = "have knowledge of"
So yes, it means both "know" and "know how."
"They do not know the use of it" Is this correct?
I don't think so.
You can know the use of a plane, does not mean that you know how to use it!
"They don't know how to use it" is marked wrong.