It is sized appropriately at 1GB and Persistence works fine. This is probably too big (1GB), but I don't know what a reasonable size for it is yet.
Hello Mike!
The size of the overlay (file or partition) depends on what you want to store of personal Linux stuff - configuration files, additional installed tools and so on. The remainig part within the FAT32 partition you can also use under Windows. I recommend to create a new folder in the directory 'mnt-system' and call it for example "privat_Windows".

The problem of flash disk install and option "overlay file" is also in Knoppix V7.4.2 if I try it in a HD install within VirtualBox. Therefore I burned a DVD and booted with it. This time my trial has been successful. I suppose it's a udev and/or timing problem because Knoppix from my VirtualBox installation reacts faster than from CD. Perhaps one or two "sleep 10" within the flash-knoppix script may solve the problem for any case.