Have a look at these:
http://www.knoppix.net/wiki/Install_FAQ
http://www.knoppix.net/wiki/Knoppix_Installer
But a Google for knoppix HD installation
will throw up other HOWTOs.
First, you need to defragment Windows (do a full defrag) and use QT Parted (on the Knoppix CD) to re-size it. As always, the best advice is back up first.