Hmm,

Seems like it wants you to mount /proc before running lilo. (I've never had to do that in my chroot environment)
What is on the first partition? If knoppix is on /dev/hda2, something has to reside in /dev/hda1.
Second, what partition is the swap in?
Can you post the results of fdisk -l and the contents of /etc/fstab and /etc/lilo.conf? These need to be done as root from the cd.
Something sounds fishy about the partition table according to lilo and this needs to be fixed first before we can proceed any further, otherwise you'll end up with a corrupted installation.