Have now had a closer look in Puppy Linux at my Knoppix 7.0.1 usb flash installation (I couldn't figure out how to view the disk while running from it in Knoppix), and it appears that I do have a file called 'knoppix-data.img' sized 1000M inside the Knoppix folder on the disk. This size is either a default, or kept from a pre-existing file (see below).
Another interesting point is this. When I chose to preserve data on the thumbdrive, rather than wiping the entire capacity, Knoppix 7.0.1 installed over the existing knoppix file within the Knoppix folder, but left untouched several files from my brief August 2011 experimentation with Knoppix 6.4 (as shown by the date stamps). The two files preserved are background.png and backgroundreadme.txt, and also an empty folder called 'modules'.
Since I've already made changes to the persistent image file, its date stamp tells me nothing. But I wonder whether that file was also preserved unchanged from the 6.4 installation, and whether this might account for the lack of a prompt to create it and/or the size of 1GB?
In any case, it's a feature that deserves some attention, to avoid unwanted results (such as a too small a persistent image file size. Maybe the modules folder might also cause problems, if the modules are not compatible with the current version of Knoppix?
A means of resizing the persistent image file, as provided in Puppy Linux, would also be helpful, or does it already exist? Puppy's unfortunately only sizes upward, so if a glitch results in an excessively large file, there's no way to downsize.

