I think you are right that something else needs altering in the section you listed. If you ever find a solution I'd like to know about it.

What about the
cp -rp /KNOPPIX/opt/lampp /var/lib
command. What does that output?
You might not need the
rm -rf /var/lib/mysql or rm -rf /opt/lampp line for this to work.
Best of luck
Regards,
Mark

P.S.
Details of my Toophpix remastering can be found through these links
http://www.knoppix.net/wiki/Knoppix_Customisations
and
http://truth.positive-internet.com/~...0412intro.html
A person who would probably be able to help is Chu Ching Huang
He wrote LiveZope from which Toophpix originated.
See
http://lists.openfoundry.org/wws/info/livezope-users
You might also find LiveZope from
ftp://math.cgu.edu.tw/pub/KNOPPIX/
the
LiveZope_CAS_LAM2P-3.2.iso
is the one. It is DVD size only.