Not an oversight.
http://www.knoppix.net/docs/index.php/FaqUsing
I believe (but I am not certain) that libdvdcss was not included in the distro due to licensing restrictions. This is not to say that you cannot make your own customized version of Knoppix that includes libdvdcss.

If you're intersted in a bootable cd that will allow you to play dvd's you might find this interesting:
http://movix.sourceforge.net/