Knee Osteoarthritis (KOA) is a leading contributor to global physical disability, where delayed diagnosis often results in irreversible joint damage and socio-economic cost. Early diagnosis remains challenging due to subtle radiographic biomarkers and limited access to specialized expertise, particularly in distributed healthcare settings. Within the evolving landscape of the Future Internet, characterized by Internet of Medical Things (IoMT), edge–cloud computing, and intelligent digital health infrastructures, there is an increasing demand for scalable, low-latency, and explainable AI-driven diagnostic solutions. In this work, we propose a Dual-Stream Wavelet Fusion Network (DS-WFN) alongside a distributed edge-cloud architectural roadmap tailored for deployment in distributed and edge-enabled healthcare ecosystems. The framework integrates a spatial morphological stream with a spectral wavelet stream, augmented by an Adaptive Wavelet Selection Mechanism (AWSM). The AWSM dynamically selects optimal frequency bases (Haar, Symlet, Daubechies) to preserve fine-grained diagnostic features typically lost in conventional CNN architectures. An Adaptive Spatial Alignment (ASA) module further ensures efficient fusion of heterogeneous representations, enabling robust feature integration across computational nodes. Experimental results across a five-fold patient-isolated cross-validation protocol demonstrate that the DS-WFN achieves a mean classification accuracy of 76.3% (95% CI: 71.6–80.8%) and a macro-averaged F1-score of 0.747 (95% CI: 0.697–0.795), consistently outperforming single-stream baselines while preventing patient-level data leakage. Furthermore, Grad-CAM visualizations provide interpretable outputs aligned with clinical diagnostic criteria, supporting trustworthy AI integration into digital healthcare workflows. Furthermore, we disclose a methodological framework for edge-based implementation, highlighting how localized inference ensures data sovereignty and real-time clinical support. By combining multiscale signal processing with deep learning under a Future Internet paradigm, this work contributes a scalable, explainable, and edge-ready diagnostic framework for early KOA detection, enabling intelligent, connected, and resource-efficient healthcare services.