This is from the doc section on this site - from the cheat codes (which specify different boot options).

"mem=128M
Specify Memory size in MByte, Some Boards apparently don't pass the proper memory size to the linux-kernel. It may cause the message "Panic cannot mount root file system" and the system hangs. Use "knoppix mem=128M" to solve that problem if your system has 128MByte memory for example (caution you MUST use a capital "M" here)."

So at the boot screen type:

"knoppix mem=(whatever_your_mem_is)M"

Please post back whether or not this fixes your problem. There may be other issues to consider, but this is a good start.