ok if you already know this, forgive me

sounds like a possibility is that the knoppix cd is corrupt, type in 'dmesg' and see if you see anything about 'cloop errors' or IO errors.

or better yet, when knoppix first boots (with the splash screen before anything else loads), instead of pressing enter,type:

'knoppix testcd'

that will check the cd to make sure everythings in tact. other than that not sure.. 3.7's really new or something?