In another post, I have uploaded and documented a minirt init modification handling cloop and squashfs transparently for the user, just using cheatcode "squashfs". It's for pure 64-bits, but the modification for 32-bits is trivial.

IMHO, present day squashfs seems to be about as stable, efficient and versatile as we need for this kind of use, and its widespread and growing use indicates others think the same.

So, with a "uni-minirt", KNOPPIX may still be distributed as cloop image, but subsequent remasterings will not have to unpack minirt.gz to make modifications in order to turn to squashfs. I think lots of remasterers will prefer squashfs, as it gives (at least) slightly simpler and faster workflow with at least as good results. OTOH. I can't see anything right now forcing us to use squashfs.

And, just for the record: This is not about the practicality or usability of cloop per se, but about the actual Knoppix use case.