Thanks for the response and the links to the wiki.

The initial problem I described was solved by integrity checking/re imaging of the knoppix filesystem. Don't blame unionfs when simpler things explain the problem...

However, I now get a consistent (completely frozen linux) hang during the apt-get upgrade process when xlibs-dev (I believe) is being installed, sounds like the bug that was mentioned in the wiki.

BTW, The knoppix instance hangs regardless of whether X is active or not ( 'init 3' and working from a console does not help).