It certainly sounds to me like you've done the rights things. Checked the md5 sum, burnt the CD as an image and at a slow speed. You're trying to run 3.8.2 so DMA should default to off (some people would get this message with 3.7 if they didn't disable DMA and the CD drive wasn't up to running DMA) so this should not be an issue.

If you can you might want to try the CD in another computer, just to see if it works there and help isolate the problem to either the computer or the CD. There is also a cheat code that will check the CD for you. (I think it's testcd or knoppix testcd, but it's been ages since I tried it and I can't switch to my Knoppix system at the moment). Enter the cheat code at the boot prompt, which at least you are getting to. You may very well find that your system needs some other cheat code to make Knoppix happy. Read up on cheat codes here and type F2 and F3 at the boot prompt for some of the cheat codes available. Unfortunately, I know of no good way to determine exactly what cheat codes will work for you. If all else fails, try the knoppix expert cheat code and step through all the questions, it migh help you determine where things are going wrong.