Well I have an iRiver iHP-140 DAP and I can boot from it.

BUT you must change the partition table of the Hard Disk.
iRiver firmware does not have a problem with that but I dont know what the iPod firwmare will do.

So you need to repartition your hard drive to this:
1.FAT (with 16K or less size of clusters) Active Primary This is were you will put the knoppix files
2.Extended (this partition is made when you have multiple partitions)
3.FAT32 Logical This is where your data goes

I made these partitions with Partition Magic.
This is my setup and it worked I dont know what will happen with your case.

Now do this:
1.Take the knoppix iso and uncompress it to the FAT partition.
2.Go to boot/isolinux and remove isolinux.bin and rename isoslinux.cfg to syslinux.cfg
3.Select all files from there and paste them to the root of your iPod FAT partition.
4.Delete the boot folder
5.Download syslinux version 2.11 and run a command window
6.From the DOS Command window type (path shows syslinux folder): syslinux.exe x: -f
(where x is your FAT partition)

Reboot select your iPod as the booting device from the bios.

Type knoppix and enter after the syslinux loader. There you go!