From my own experience as a physio I have yet to see a completely successfull lateral release. Anterior knee pain can be caused by a whole host of problems and if you have severe arthritis a lateral release is unlikey to help. Have you had an MRI to help confirm a diagnosis? I personally would investigate all conservative methods before opting for an operation. One common cause of knee pain is problematic foot biomechanics, in which case a podiatrist is the best person to see. Have you had any physio input either?

Scooby

I would have to agree w/ Scooby, try all non-invasive methods of treatment first. . .I would get a referral to an orthopedic/manual physical therapist to help identify why you've developed chondromalacia. I've had a lot of success with relieving anterior knee pain w/ ITB band stretching, VMO training and addressing kinetic chain dysfunction, such as proximal hip stability and lack of great toe extension. A physical therapist that deals w/ runners and athletes should be able to identify your problem areas. Best of luck. . .conservative treatment usually works well.