What you're describing is the technique of just about any basic walk in ballroom, so as you work on the fundamental walking action, your Waltz will naturally improve.
When you walk, in order to maintain the same height, the legs will continue to straighten as the feet move farther apart, then continue to bend as the feet come together. The legs are therefore at their straightest at the "mid-stride" position, when the feet are farthest apart. Mid-stride is the point at which the moving foot stops moving and first starts to take weight.
When I say "straightest" to describe the position of the knees, realize that it doesn't necessarily mean fully straight. "Straight" in this case is a relative term, so "straightest" is merely an indication that the knees are at their least bent (relative to the rest of the action), however they may still be bent to some degree.
Assuming no rise & fall, how straight your legs get ultimately depends on two factors: (1) the length of your stride, and (2) the amount of flex in your knees at the beginning of the walking action. For example, if you begin with your knees only slightly bent and take a stride of 36 inches, your legs will almost certainly be completely straight at mid-stride. On the other hand, if you begin in a deeply lowered position and move only 6 inches across the floor, your legs will be scarcely less bent at mid-stride than when you began.
That being said, in Waltz we like to bend our knees -- It's the "fall" part of rise & fall -- and ideally the length of stride is considerable. Therefore, the knees should probably still be at least slightly bent, even at their straightest point at mid-stride.
Regards,
Jonathan Atkinson
www.ballroomdancers.com
