I tried just regular boot on Knoppix, as well as Knoppix failsafe, both hang at the same place.

It goes through the hardware detection automation, finds video mouse sound etc etc....then starts X11
And that's where the problems show up. It goes to the grey/black screen with the black X as the cursor. Cursor moves around, but the computer doesn't do anything afterwords. The CD finally spins down and just sits there.

3.8 is the version of Knoppix I am using. I also tried 3.4.