How can I quickly fix knock out issues with Outlined Characters?

So, I already had an Ungroup script that seems to work just fine for this. Once you have the text isolated just run the script below and it will ungroup all nested groups and clipping masks leaving only letters and paths. For your example file, the gradient fill is actually a clipped rectangle so you would just need to delete that and then only have your letters left over. You could then run an action that does whatever color changes you need.

One last note: All of the characters in your sample file are compound paths even if they don't need to be (e.g. "I"). This doesn't really cause an issue, I just wanted to point it out.

// Ungroup.jsx

var doc = app.activeDocument;
var sel = doc.selection;

if (sel.length > 0) {
  for (var i = 0; i < sel.length; i++) {
    ungroup(sel[i]);
  }
}

/**
 * Ungroup a groupItem within Adobe Illustrator. Similar to `Object > Ungroup`
 * @9397041 {*} object    An Adobe Illustrator groupItem
 * @9397041 {*} recursive Should nested groupItems also be ungrouped
 */
function ungroup(object, recursive) {
  // if a non group item is passed just return
  if (object.typename != "GroupItem") {
    return;
  }
  recursive = typeof recursive !== "undefined" ? recursive : true;
  var subObject;
  while (object.pageItems.length > 0) {
    if (object.pageItems[0].typename == "GroupItem" && !object.pageItems[0].clipped) {
      subObject = object.pageItems[0];
      subObject.move(object, ElementPlacement.PLACEBEFORE);
      if (recursive) {
        ungroup(subObject, recursive);
      }
    } else {
      object.pageItems[0].move(object, ElementPlacement.PLACEBEFORE);
    }
  }
}