Prerequisites: Kvm must be running well. In 7.0.5, is does out of the box. Modules may otherwise have to be loaded. Qemu without kvm is rather slow, only for testing and emergencies IMHO. There have been bug problems in recent versions, so it's good practice to run package update of qemu-kvm first.

Code:
sudo modprobe kvm && sudo modprobe kvm-intel
Of course, you need to have the ISO, check downloading by md5sum or similar.
Log into the download directory.

1. Have USB media inserted, you can use fdisk -l to check what it identifies as:

Code:
knoppix@Microknoppix:/store/download/iso$ fdisk -l
.....
Disk /dev/sdc: 31.6 GB, 31608274944 bytes
64 heads, 32 sectors/track, 30144 cylinders, total 61734912 sectors
Units = sectors of 1 * 512 = 512 bytes
Sector size (logical/physical): 512 bytes / 512 bytes
I/O size (minimum/optimal): 512 bytes / 512 bytes
Disk identifier: 0x6f20736b

   Device Boot      Start         End      Blocks   Id  System
/dev/sdc1   *        2048    61734911    30866432    c  W95 FAT32 (LBA)
2. Make qemu boot the ISO
Code:
 sudo qemu -machine accel=kvm -cdrom KNOPPIX_V7.0.5DVD-2012-12-21-EN.iso -hdb /dev/sdc -m 1024 -boot d
Now you get the booting screen where you can just type knoppix (not Knoppix64 unless you run a full 64-bits system) and eventual keyboard modifications etc, just like booting a DVD.

It may be a bit confusing with all the different drive designations, and inside Knoppix under qemu, /dev/sdc1 becomes sda1, but if you use flash-knoppix to install to that medium, you will get a bootable stick by this procedure - at least I did.

(3. - eventually)
To have a basic Poor Man's Install of the ISO, you can boot the stick, do some tweaks, mount a suitable harddisk partition, and copy the system to a basic Knoppix directory on the disk:

Here, I used the Win7 partition:

Code:
mount /media/sda2
sudo rsync -ax /mnt-system/KNOPPIX/* /media/sda2/KNOPPIX705ISO &
Next time I boot from the stick, I use the command line

Code:
knoppix64 fromhd=/dev/sda2 knoppix_dir=KNOPPIX705ISO
Plus eventual other cheatcodes applicable.

The reason I make a separate directory for the ISO version, is all the problems I have had with purging and remastering 7.0.5. I can easily back up to this point.