It would appear the Win32 codecs are not included in the lastest distro. I'm curious as to why, since I've found them for free on various Linux sites
They are not free (free as in freedom) to be distributed. Quicktime, Windows Media & other codecs have less restrictive licenses as compared to most software but they are still not GPL compatible, so inclusion on a CD/DVD for distribution is most likely in violation of the codec's license.

I can't exactly install them to a compressed DVD...without doing the whole re-mastering thing right?
Knoppix allows you to install new software on a live running system (running from a CD/DVD). You do not need to remaster in order to run new software since changes made (or software installed) is stored in the system's RAM. As soon as the system is shutdown or rebooted, then the changes made (or software installed) is lost.

Is it possible to place Xine, Kaffiene, or another of those players on a Windows NTFS hard drive with all the needed codecs - then run it from inside of Knoppix?
Sure. Your method is a way of getting aaroung the lost changes. Store all the .DEBs, .TAR.GZs on a NTFS partition and install them at each bootup of Knoppix.