I haven't worked with Knoppix since version 3.4, but I had a similar problem when trying to create a dvd. There is a 2GB limitation (per file) when using an ISO9660 filesystem. You are most likely burning your dvd using ISO9660, so you'll need to get your Knoppix image file down to 2GB or less. Another possible option that I have not explored is to use UDF as the filesystem for your dvd. I don't know if this would work for sure and don't know exactly how to do it. Maybe someone here has already used UDF with a dvd and could give you instructions.

Ryan