It just might be a problem other than low memory; the window manager startup script is /etc/X11/Xsession.d/45Xsession & it seems to use the 'low memory' message as a default message if it is unable to start kde.
Try 'knoppix desktop=xfce' to see if xfce will start. Try also booting 'knoppix 2' (terminal mode) then manually start kde with 'startx'. You can check how much memory you are showing from terminal mode.