According to google, the whole line means(The words in bold are the red line) A swordsman dressed up was sitting on a rock, he was holding his knees halfway, and a long sword was behind him.
Someone with the appearance of a swordsman crouched on a large rock with his knees hugged to his chest and a long sword slung over his back.
No idea how to half hug the kneecap, does it mean using one hand laying on the kneecap, or one leg crunched while the other leg is lying straight?
The translation is "The well-dressed swordsman sat upright on a rock, half-hugging his knee and carrying a long sword over his back." I imagine that it's supposed to be a "cool" pose, with the guy having one knee up and draping his elbow on it. Something like the picture below? But the back would have to be slightly bent. The "upright" part might just be emphasizing his warrior-ness or whatever. Correct me if I'm wrong, but I think it's not so much a translation problem as much as it is just bad writing. EDIT: jk! I'm a new user so it won't let me post images/links! Hopefully someone else can link a reference pic for you.