Short Answer:

We knew, in general terms, what the Khmer Rouge were doing. There wasn't a simple intervention possible, and the more complex interventions were off the table in the wake of the Vietnam War. The politics of the Carter Administration made it particularly disinclined to intervention, but that's not to say that a simple intervention was possible.

Discussion:

In the late 70s Allard Lowenstein, the Carter Administration's representative to the United Nations Commission on Human Rights, came to my high school to talk about the Administration's human rights initiatives during a Holocaust remembrance event. He took questions from the audience, and I asked him specifically about Cambodia where atrocities were very much in the news, which I recall characterizing as a "Holocaust happening now". He responded with a general statement about human rights globally, but nothing about Cambodia. And while the recollection of a random teenager isn't much, you can find record of people like Representative Norman Dicks (D-WA) who wrote President Carter saying that the genocide committed by the Khmer Rouge resembled

"those perpetrated in Nazi Germany during World War II, and which make human-rights violations in Chile, Uganda, and the Soviet Union pale by comparison."

The Administration didn't respond substantively to him either, nor to Representative Steven Solarz (D-NY) who was also pursuing this issue. Inside the Administration, it appears that Zbigniew Brzezinski was the official pushing a hawkish rhetorical line; otherwise the Administration seemed disinclined to engage just what the Khmer Rouge were doing, and just how extraordinary their genocide was. And Brzezinski was far more focussed on the problem of confronting the Soviet Union with triangulation from China, he wasn't eager to joust with China over their client in Cambodia. So directly confronting or even rhetorically calling out the ferocity of the Khmer Rouge didn't fit the policy agenda that the Administration had set nor how they understood American interests. That was true of the human rights oriented idealists like Carter, and it was also true of the realpolitikers like Brzezinski.

So yes, people knew, a New York Times reader saw pieces like reporter Sidney Schanberg's 1975 article: "The 'Enemy' is Red, Cruel and, after 5 years little known". Time magazine similarly published a substantially detailed piece reaching an American mass audience in 1976: "Why Are the Khmer Killing the Khmer?" . Americans didn't know the scale of the horror -- that wouldn't become clear until after Vietnam invaded. But that terrible things were happening, that was known. The US Government, obviously, knew much more - but still not everything. Knowing that "a lot of people have been shot" is different than a precise accounting; it's not clear that even the Khmer Rouge knew how many people they were killing as they were doing it.

Why didn't the US "do something"? The question would be "do what"? The US had just gotten out of a long miserable war in Southeast Asia, and there was very little political appetite for any return. Congress was unwilling to appropriate funds for such things, and the Carter Administration itself was disinclined to intervention, quite the opposite. One of the little remembered aspects of Carter Administration foreign policy was their desire to press for South Korean democracy, and to withdraw US troops from the region. So while I don't think even a more hawkish Administration would have been eager to re-enter the battlefield of SE Asia, the Carter Administration in particular would have been a very unlikely proponent of such measures. The Administration did what it could within its political limitations-- food aid, and discussion of Cambodia as a humanitarian problem, rather than a war crime.

The recent history of the US involvement in Cambodia wasn't exactly encouraging for the prospect that military action would bring about something better. The US had, after all, bombed Cambodia heavily during the Vietnam War, to little net effect. Some like William Shawcross assert that this bombing campaign brought the Khmer Rouge to power-- not an argument that makes sense to me, but you certainly can say that the prospect of a bombing campaign was politically impossible at the time. Similarly, the prospect of reintroducing US ground forces would have been politically untenable. So what, exactly, was there "to do"?

Similarly, Carter was opposed to the kinds of tools that we commonly used to overthrow governments, coups and cultivating relationships with military strongmen. These kinds of relationships themselves had very recently produced their own terrible slaughters. So, for example, President Nixon had been fond of Yahya Khan of Pakistan, a strongman who "delivered" for Nixon -- and also was responsible for a slaughter in East Bengal/East Pakistan (now Bangladesh). The "just overthrow them" idea was thus not appealing to the Carter Administration, nor was there any obvious instrument.

The Khmer Rouge were a ferocious revolutionary Army, substantially backed by the Chinese (in a sense, they're the fullest incarnation of Mao's ideas of Cultural Revolution- they do things that Mao had hoped for, but never achieved). Once the Lon Nol regime shattered, King Sihanouk was still a political force, but there was no military muscle to act _on_ , no way to mobilize against the Khmer Rouge. The way that they were forced out-- by the Vietnamese Army-- was likely the only way their prompt removal could have occurred. We obviously had no leverage over the Vietnamese at this point; their principal foreign support came from the Soviet Union.

The US evaluation of interests held that Vietnam -- now unified under the communists-- was still an enemy, and the Administration was inclined to support the Government of Cambodia, odious as it was, against threats and ultimately invasion by Vietnam. There is evidence that the US encouraged Chinese and Thai support for the Khmer Rouge, resulting in a confused and confusing policy framework.

In sum, the Carter Administration never responded to what was happening in Cambodia with a coherent appreciation of the horror, nor with any practical plan to remove the agent causing that horror, the Khmer Rouge regime. The Administration treated it as a humanitarian problem, like a famine, but did not engage that this wasn't some accident of food distribution, but rather a policy of genocide. You can characterize this as an analytical failure, as a failure of resolve-- but the historical context was that "after the Vietnam War, the US political establishment wanted nothing more to do with military interventions in SE Asia".

Sources:

Gary J. Bass, The Blood Telegram: Nixon, Kissinger and a Forgotten Genocide (New York: Alfred A. Knopf, 2013). [This is must reading for anyone interested in the diplomatic history of genocide in the 1970s. ]

Suhrke, Astri, and Charles E. Morrison. “Carter and Korea: The Difficulties of Disengagement.” The World Today, vol. 33, no. 10, 1977, pp. 366–375.

CLYMER, KENTON. “Jimmy Carter, Human Rights, and Cambodia.” Diplomatic History, vol. 27, no. 2, 2003, pp. 245–278.

Clymer also has a book length treatment of a larger span of history of US - Cambodia relations

Clymer, Kenton. "The United States and Cambodia, 1969–2000: A Troubled Relationship". (New York, 2004)

Shawcross, William. "Sideshow: Nixon, Kissinger and the Destruction of Cambodia" [This 1979 book places substantial blame on the US for the rise of the Khmer Rouge. I don't find Shawcross' argument convincing, but it's important to read to frame how someone might have thought about the possible use of force in 1978 or '79]

Ben Kiernan, ed., "Genocide and democracy in Cambodia. The Khmer Rouge, the United Nations and the international community". New Haven, Yale University/Southeast Asia Studies, 1993 (Monograph series 41)