Don't make boot floopies, make a Smart Boot Manager boot floppy or install SBM to your hard disks MBR. Or use XOSL (I like XOSL a lot better, but most people here don't have the patience to spend the extra one minute it takes to set it up over SBM.) If you do use Boot Floppies they contain a particular Linux kernel in them, and you may be using a different kernel than was intended for that Knoppix CD. SBM or XOSL boot the kernel from CD so they get the intended kernel.

3.7 or 3.8.2 - use which works better for you. 3.8.2 contains the union file system, but there seem to be a lot of issues with a number of devices including writing to CDs.