That ram is going to be a real bottleneck with any version, particularly on a laptop that may share some of the ram for video. Having a swap file would be essential for Knoppix, but it will only help so much and I doubt it will be enough, particularly with a slow laptop hard drive as the swap device.

As to versions, 5.0.1 seems to be a bit of a dsapointment. At least among people who respond to polls more people seem disatisfied with it that happy with it. So I would suggest starting with 4.0.2, which is still available by BitTorrent and on most servers. But the best advice is to get some 700 meg CDRW media and try a lot of things yourself to see what works best for you.