Are you booting the Cd with any cheatcodes? If you just boot knoppix CD it *should* ignore everything on the HD & just boot & run from CD.
The code section you have quoted should only activate if you have booted with a 'fromhd=/dev/xxx' cheatcode.

Question? Why did you use this unusual hd install procedure instead of either the built-in installer script ('sudo knoppix-installer') or the built-in 'poormans install' (boot with the bootcode 'tohd=/dev/hda3'). The latter would give you an install similar to what you have except the entire install would be on hda3 and you would have to manually install your bootloader. You could then boot this from CD booting with the bootcode 'fromhd=/dev/hda3 or fromhd=/scan'.