While snooping around the stock init script, I spotted a variable, home, in the mountdata function standing out from the crowd. After doing some quick tests, the preliminary results are summarised as follows,
Prerequisite: The persistent overlay (.img, .aes or .inf) being on the same partition as the KNOPPIX file.
Functionality: Loading a specific persistent overlay at the boot time.
Usage: knoppix home=/mnt-system/foobar/dummy
*The dirname and basename cannot contain any whitespace characters.
*The basename needs to be unique if there are more than one overlay files in the same folder because the suffix cannot be part of the argument.
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