/etc/profile won't execute xterm or konsole

I am trying to make /etc/profile startup an xterm window when the
"knoppix" user is logged in at boot up (among other things, but I
am trying to keep my question as simple as possible :-)).

My /etc/profile command is:
/home/knoppix/startup.sh &

startup.sh:
cd /home/knoppix
sleep 120 (wait to *assure* that X-windows has started)
xterm > trace.lis 2>&1
ps -aux >> trace.lis

I *know* that startup.sh *is* executing, as I have traced the execution of every line.
But the xterm command does *nothing*.
It reports no errors.
The process list shows no xterm.
If I manually execute startup.sh, it works fine.
I can execute any *other* programs just fine.
It's only xterm (and konsole) that are problematic.
I am totally stumped.
Any ideas ?
Thanks !,
Mark

For some reason, the "DISPLAY" env var was not defined.
So this fixed it:

export DISPLAY=:0.0

What I can't figure out is why this was not required on my
previous customized Knoppix CD (which was 3.3 inst of 3.3.2).