Are you using Knoppix 5.0.1 (latest version)? The latest version does not use XFree86. It uses x.org. This latest version has no problems supporting my Radeon 9200.

The alternatives are: 1) download the latest Knoppix version and run as LiveCD or 2) download and install Debian Testing (nicknamed Etch) instead, if upgrading and recompiling is what you want to do. The beta 3 version is now ready, the net-install download is smaller than Knoppix and there's plenty of mirrors to make download fast. Installing Debian is just as easy as Knoppix, if not easier.

Most Knoppix people will tell you that a HD install of Knoppix is a hazardous affair. Any major upgrade or change of packages like what you are planning to do will almost always break Knoppix. So don't do it unless you are adventurous.